Are transfers of a Bhc franchise interest after death or incapacity subject to Bhc's right of first refusal or the transfer fee?
Bhc Franchise · 2025 FDDAnswer from 2025 FDD Document
o one year and Franchisor will periodically discuss the status with the heirs of the decedent. Franchisor can place an interim manager Master Franchised BHC Restaurant, and Master Franchisee must pay Franchisor the manager's salary, transportation, lodging and related living expenses, and our management administration fee of 15%.
(c) No Transfer under this section 12.4 will be subject to (i) Franchisor's right of first refusal set forth in section 12.3 hereof or (ii) the Transfer Fee set forth in section 12.2(b)(vii) above, although such refusal right and Transfer Fee will be applicable to any subsequent Transfer by Master Franchisee's (or a Majority Equity Owner's) heirs, personal representatives, or conservators. However, Master Franchisee must comply with sections 12.2(b)(i) through (iv) and (to the extent applicable) section 12.2(c) above, as well as provide Franchisor with full disclosure of the terms of said transfer not later than three business days prior to the close of the transaction. In addition, copies of fully executed paperwork must be delivered to Franchisor no less than three business days following the close of the transaction.
12.5 Consent of Franchisor to Transfers.
Except as otherwise provided in this Agreement and subject to Franchisor's right of first refusal provided in section 12.3 hereof, Master Franchisee or an Principal Equity Operator may consummate any Transfer of a direct or indirect interest in this Agreement, the BHC Restaurant or the economic benefits derived therefrom, or any equity interest in Master Franchisee's franchised entity, not permitted by the preceding section 12.4, only after written notice to Franchisor and only with Franchisor's written consent, which will not be unreasonably withheld.
12.6 Transfers from Master Franchisee to an Affiliated Entity.
- (a) Upon not less than 30 days' prior written notice to Franchisor, Master Franchisee may, upon Franchisor's written consent, assign and transfer this Agreement at its entirety to an entity that is (i) organized to operate as a developer of BHC Restaurants and (ii) entirely owned by Master Franchisee ("Affiliated Entity").
- (b) Any assignment and transfer by Master Franchisee of the rights, duties and obligations under this Agreement to an Affiliated Entity must be evidenced by a written instrument, in form reasonably satisfactory to Franchisor, under the terms of which said business entity expressly assumes all of Master Franchisee's rights, duties, and obligations hereunder, whether accrued at the time of such assignment or arising thereafter, and the assignee agrees to be bound by all the terms and provisions of this Agreement to the same extent and in the same manner as Master Franchisee is. A copy of said instrument, executed by both Master Franchisee and said business entity must be delivered to Franchisor before the effective date of the transfer. Master Franchisee will not be able to maintain direct ownership and operation of the BHC Restaurants which Master Franchisee (or its Affiliated Entities) has developed after such assignment.
**13.
Source: Item 23 — Receipts (FDD pages 52–230)
What This Means (2025 FDD)
According to Bhc's 2025 Franchise Disclosure Document, transfers of a franchise due to death or incapacity to a franchisee's heirs, personal representatives, or conservators are exempt from Bhc's right of first refusal and the standard transfer fee. However, this exemption does not extend to any subsequent transfers by these heirs, personal representatives, or conservators, which would then be subject to both the right of first refusal and the transfer fee.
Despite the exemption from the right of first refusal and transfer fee for the initial transfer, the franchisee's heirs, personal representatives, or conservators must still adhere to specific requirements. They must comply with sections 12.2(b)(i) through (iv) and, if applicable, section 12.2(c) of the franchise agreement. Additionally, they are required to provide Bhc with full disclosure of the terms of the transfer at least three business days before the transaction closes. Furthermore, copies of all executed paperwork must be delivered to Bhc within three business days after the transaction is completed.
In the event of the death or legal incapacity of an individual franchisee or a majority equity owner, the transfer of the franchise interest to a spouse, parent, or adult children will not be considered an assignment, provided that a qualified and trained general manager remains employed at the BHC Restaurant. Alternatively, another responsible management employee or agent of the franchisee, satisfactorily trained by Bhc, can be responsible for the franchised business. The transfer of the interest or equity must occur as soon as practicable, but no more than 270 days after the date of death, following the person's will or the laws of intestacy, ensuring adequate management of the franchised business.
If Bhc determines that there is no imminent sale to a qualified successor or no heir or principal equity operator capable of operating the franchise, Bhc has the option to commence operating the BHC Restaurant on the franchisee's behalf. This operation can last for up to 90 days and may be renewed as deemed necessary by Bhc for up to one year. During this period, Bhc will periodically discuss the status with the heirs of the decedent. Bhc can also place an interim manager at the BHC Restaurant, with the franchisee's estate responsible for covering the manager's salary, transportation, lodging, related living expenses, and a management administration fee of 15%.