Does Bhc have a right of first refusal regarding the transfer of a non-controlling interest?
Bhc Franchise · 2025 FDDAnswer from 2025 FDD Document
12.2 Assignment by Master Franchisee.
- (a) This Agreement is being executed by Franchisor in reliance upon and in consideration of the unique skills and qualifications of Master Franchisee and the Principal Equity Operators and the trust and confidence reposed in them by Franchisor. Therefore, neither Master Franchisee's interest in this Agreement and the Franchise granted hereunder, nor all or substantially all of the assets of the BHC Restaurant, nor a controlling or non-controlling interest in Master Franchisee (if an entity), may be assigned, transferred, shared or divided, voluntarily or involuntarily, in whole or in part, by operation of law or otherwise, in any manner (collectively, "Assignment by Master Franchisee"), without Franchisor's prior written consent and, except for any transfer of a non-controlling interest, subject to Franchisor's right of first refusal provided for in section 12.3 hereof, and transfer to an Affiliated Entity provided for in section 12.6 hereof. Franchisor's consent to a specific Assignment by Master Franchisee is not cumulative and will not apply to any subsequent assignments, in respect of each of which Master Franchisee must comply with this section 12.2.
Source: Item 23 — Receipts (FDD pages 52–230)
What This Means (2025 FDD)
According to Bhc's 2025 Franchise Disclosure Document, the franchisor has a right of first refusal regarding the transfer of a controlling interest, but not necessarily a non-controlling interest, in the franchise. Specifically, Section 12.2(a) states that neither a controlling nor non-controlling interest in the Master Franchisee may be assigned without Bhc's prior written consent. However, the right of first refusal in Section 12.3 applies except for any transfer of a non-controlling interest. This indicates that while Bhc's consent is required for any transfer, their right of first refusal may not apply to non-controlling interests.
For a prospective franchisee, this distinction is important. If you plan to transfer a controlling interest in your Bhc franchise, the franchisor has the right to step in and purchase the franchise on the same terms as your offer. However, if you are only transferring a non-controlling interest, Bhc's right of first refusal may not apply, giving you more flexibility in finding a suitable partner or investor.
It's crucial to note that all transfers, whether controlling or non-controlling, require Bhc's prior written consent. The franchisor will likely review the proposed transferee's qualifications and financial capabilities before granting consent. Additionally, the franchisee must provide written notice to Bhc of their intent to transfer any interest, including the proposed transferee's information and copies of all related agreements. Therefore, while the right of first refusal may not apply to non-controlling interests, the franchisor still maintains significant control over who becomes involved in the franchise.
It is advisable for prospective franchisees to seek clarification from Bhc regarding the specific conditions and circumstances under which the right of first refusal would or would not apply to a non-controlling interest transfer. Understanding these nuances can help franchisees plan for future ownership changes and ensure compliance with the franchise agreement.