During the term of the Master Franchise Agreement, what specific activities are prohibited regarding competing businesses selling goods or offering services equivalent to Bhc Products or the Franchised Business, without Franchisor's express prior written consent?
Bhc Franchise · 2025 FDDAnswer from 2025 FDD Document
(a) Master Franchisee acknowledges it will receive valuable specialized training and access to Proprietary Information, including information regarding the operational, sales, promotional and marketing methods and techniques of the System and Franchisor's Trade Secrets. In consideration for the use and license of such valuable information, Master Franchisee agrees that it will not during the term of this Agreement operate, manage, own, assist or hold an interest in (direct or indirect as an employee, officer, director, shareholder, manager, member, partner or otherwise), or engage in, any competing business selling goods or offering services equivalent to BHC Products or the Franchised Business, without Franchisor's express prior written consent, which consent may be withheld in Franchisor's sole and absolute discretion.
(b) It is the intention of both Master Franchisee and Franchisor that Master Franchisee maximizes the Franchised Business within the Territory, and any action of Master Franchisee that diverts business to another entity or diminishes the Franchised Business being conducted in the Territory will be a material breach of this Agreement. Accordingly, neither Master Franchisee nor any Principal Equity Operator may, either directly or indirectly, for itself or themselves, or through, on behalf of, or in conjunction with, any person, persons, partnership, corporation or other entity, (i) divert or attempt to divert any business or customer of the Franchised Business to any competitor, by direct or indirect inducement or otherwise, or (ii) do or perform, directly or indirectly, any other act injurious or prejudicial to the goodwill associated with the Marks or the System.
Source: Item 23 — Receipts (FDD pages 52–230)
What This Means (2025 FDD)
According to Bhc's 2025 Franchise Disclosure Document, during the term of the Master Franchise Agreement, a Master Franchisee is restricted from engaging in certain activities related to competing businesses. Specifically, the Master Franchisee cannot operate, manage, own, assist, or hold an interest in any business that sells goods or offers services equivalent to Bhc Products or the Franchised Business without the express prior written consent of Bhc. This prohibition extends to direct or indirect involvement as an employee, officer, director, shareholder, manager, member, partner, or in any other capacity.
This restriction is in place because the Master Franchisee will receive specialized training and access to proprietary information, including operational, sales, promotional, and marketing methods, techniques of the Bhc system, and trade secrets. The agreement emphasizes that the Master Franchisee should maximize the Franchised Business within their territory. Any action that diverts business to another entity or diminishes the Franchised Business is considered a material breach of the agreement.
Furthermore, the Master Franchisee, along with any Principal Equity Operator, is prohibited from diverting or attempting to divert any business or customer of the Franchised Business to any competitor through direct or indirect inducement. They are also barred from performing any act that is injurious or prejudicial to the goodwill associated with the Bhc Marks or the System. Bhc retains the right to develop other systems involving similar or dissimilar services or goods under different trademarks without granting the Master Franchisee any rights to those systems. Bhc also reserves all rights to market and sell Bhc Products at venues other than Bhc Restaurants and through other channels of distribution, even within the Master Franchisee's Territory.
In practical terms, this means a Bhc Master Franchisee must be fully dedicated to the Bhc business and cannot have any conflicting business interests during the term of the agreement without prior approval from Bhc. This is a fairly standard non-compete clause in franchising, designed to protect the brand and prevent franchisees from using the franchisor's knowledge and resources to benefit a competing business.