Can Bhc regulate the form of non-disclosure agreements used by franchisees?

According to Bhc's 2025 Franchise Disclosure Document, Bhc can regulate the form of non-disclosure agreements that franchisees use with individuals who have access to Bhc's confidential information. This includes employees or anyone else who might gain access to trade secrets and other sensitive data related to the Bhc restaurant operations. Bhc also has the right to be a third-party beneficiary of these agreements, which means Bhc can independently enforce the terms of the non-disclosure agreements, even if Bhc is not a direct party to the agreement between the franchisee and their employee or other individual.

This regulation is significant for prospective Bhc franchisees because it means they must use the specific form of non-disclosure agreement that Bhc requires. Franchisees cannot create their own agreements or modify Bhc's standard form without approval. This ensures uniformity and consistency in how confidential information is protected across all Bhc franchise locations. It also reduces the risk of franchisees using inadequate or unenforceable agreements that could jeopardize Bhc's trade secrets.

Furthermore, the franchisee is obligated to take reasonable steps to prevent the improper disclosure of Bhc's confidential information. This includes not only using the mandated non-disclosure agreements but also actively monitoring and enforcing those agreements. If a franchisee fails to adequately protect Bhc's confidential information, they could face legal action from Bhc, as Bhc has independent enforcement rights as a third-party beneficiary.

This requirement is fairly standard in the franchise industry, as franchisors typically have a strong interest in protecting their proprietary information and trade secrets. By regulating the form of non-disclosure agreements and maintaining third-party beneficiary status, Bhc retains significant control over how its confidential information is handled and protected by its franchisees.