Does Bhc require franchisees to develop the potential for future franchised business, and if so, how is this development determined?

According to Bhc's 2025 Franchise Disclosure Document, franchisees are required to develop the potential for future franchised business as approved by Bhc. Franchisees must diligently and effectively promote, market, and engage in the franchised business at their Bhc restaurant. Additionally, franchisees must devote and focus a substantial portion of their attention and efforts to such promotion and development.

For Master Franchisees, there are specific development obligations. Master Franchisees must secure, establish, and operate a minimum cumulative number of Bhc restaurants in their development area by certain dates outlined in the Initial Development Schedule. These required restaurant quotas are referred to as Initial Development Quotas. Before granting subfranchises to third parties, Master Franchisees must first establish and operate at least one franchised Bhc restaurant within their development area under a separate Subfranchise Agreement.

Failure to meet these development quotas can result in financial penalties. If a Master Franchisee fails to meet any of the Initial Development Quotas by the specified date, Bhc has the right to collect an amount up to the then-current MF Development Fee for each restaurant short of the quota. This amount must be paid within seven days of receiving Bhc's request for payment. However, Bhc may defer a scheduled opening date if it determines that the Master Franchisee made a diligent effort to open a restaurant but was unable to do so for reasons beyond their reasonable control.

Bhc also retains significant control over the brand and system. Franchisees and Master Franchisees are only granted the right to operate their franchised business at their specific Bhc restaurant or within their designated development area. They must offer only Bhc products and other goods and services that Bhc designates as required or approved. Bhc reserves the right to develop other systems involving similar or dissimilar services or goods under different trademarks, without granting franchisees any rights in those systems. Bhc also reserves the right to market and sell Bhc products at venues other than Bhc restaurants and through other channels of distribution, even within a franchisee's territory.