Does state law affect the termination provisions in the Bhc Multi-Unit Master Franchise Agreement?
Bhc Franchise · 2025 FDDAnswer from 2025 FDD Document
iate court in California. | | x. Choice of law | 16.13 | California law governs the arbitration of disputes under the MFA. | | Provision | Section in Multi-Unit Master Franchise Agreement | Summary Restaurants in the Development Area under the Development Schedule. | | e. Termination by franchisor without cause | 13.1 | We can terminate the MFA if you are in breach of that agreement (This provision is subject to state law.) | | f. Termination by franchisor with cause | 13.2 | We can terminate the MFA if you are in material breach of that agreement (This provision is subject to state law.) | | g. "Cause" defined – curable defaults | 13.1 | You have 30 days after notice to cure monetary defaults and other defaults (including defaults under a lease for your Master Franchise BHC Restaurants) that can be cured. (This provision is subject to state law.) | | h. "Cause" defined – non-curable defaults | 13.2 | Non-curable defaults: your bankruptcy or insolvency; your abandonment of the franchised business; you make material misrepresentations relating to your acquisition of the Franchise or you engage in conduct that reflects materially and unfavorably upon the operation and reputation of the Master Franchised Business or the BHC System; you and us agree in writing to terminate the Franchise; you fail, for a period of 10 days after notification of noncompliance, to comply with any federal, state or local law or regulation applicable to the operation of the Franchise; after curing any default, you engage in the same noncompliance whether or not such noncompliance is corrected after notice; you repeatedly fail to comply with one or more material requirements of the MFA, whether or not corrected after notice; the Franchised Business or your Master Franchise BHC Restaurant is seized, taken over, or foreclosed by a government official, creditor, lien holder or lessor, or that a final judgment against you remains unsatisfied for 30 days; you are convicted of a felony or any other criminal misconduct that is relevant to the operation of the Franchise; an audit or investigation conducted by us reveals that you knowingly maintained false books or records; or submitted false reports to us, or knowingly understated your Gross Revenue or withheld the reporting of any of your Gross Revenue (see further information in Section 13.2(a)(x)); we make a reasonable determination that your continued operation | | Provision | Section in Multi-Unit Master Franchise Agreement | Summary | |------------------------------------------------------------|--------------------------------------------------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------| | | | of the Franchise will result in an imminent danger to public health or safety (This provision is subject to state law). | | i. Franchisee's obligations on termination or non- renewal | 15.1 | Obligations include removal of our Marks and other trademarks, return of all confidential and proprietary information and erasure of all copies of confidential and proprietary information and payment of amounts due (also see section "s" in this Table, below). | | j. Cross-Default | 15.3 | Any default by you shall be deemed to be a material default of each and every said agreement, and furthermore, in the event of termination, for any cause, of this Agreement, or any other agreement between the parties hereto, including, but not limited to, a MFA, between the parties hereto, Franchisor may, at its option, terminate any and all said agreements. No right or remedy which Franchisor may have (including termination) is exclusive of any other right or remedy provided under law or equity and Franchisor may pursue any rights and/or remedies available. | | k. Assignment of | 12.1 | No restriction on our right to assign. | | contract by | | | | franchisor | | | | 1.
Source: Item 17 — Renewal, Termination, Transfer, And Dispute Resolution (FDD pages 43–49)
What This Means (2025 FDD)
According to Bhc's 2025 Franchise Disclosure Document, state law does affect the termination provisions in the Multi-Unit Master Franchise Agreement (MFA). Specifically, the FDD indicates that the franchisor's right to terminate the MFA, both with and without cause, is subject to state law. This means that state laws may impose additional requirements or restrictions on Bhc's ability to terminate the agreement, potentially providing additional protections to the franchisee.
Furthermore, the definition of "cause" for termination, including both curable and non-curable defaults, is also subject to state law. For curable defaults, the franchisee typically has 30 days to remedy the issue after receiving notice. Non-curable defaults include events like bankruptcy, abandonment of the business, or failure to comply with federal, state, or local laws. However, the extent to which Bhc can rely on these defaults as grounds for termination may be influenced by state law.
Additionally, Bhc's option to purchase the master franchisee's business upon termination, expiration, or non-renewal of the MFA is subject to state law. This implies that state regulations could impact the enforceability or terms of Bhc's option to purchase the franchisee's assets, potentially affecting the franchisee's exit strategy. Therefore, prospective franchisees should consult with legal counsel to understand how state laws in their specific jurisdiction may affect the termination provisions outlined in the Bhc Multi-Unit Master Franchise Agreement.