Under what circumstances does the Multi-Unit Master Franchise Agreement for Bhc provide for termination?
Bhc Franchise · 2025 FDDAnswer from 2025 FDD Document
13.2 Immediate Termination.
(a) Franchisor has the right to immediately terminate this Agreement upon notice to Master Franchisee without an opportunity to cure if:
- (i) Master Franchisee admits its inability to pay its debts as they come due, or Master Franchisee or the business to which the Franchise relates (A) has been the subject of an order for relief in bankruptcy, (B) is judicially determined to be insolvent or (C) has all or a substantial part of its assets assigned to or for the benefit of any creditor;
- (ii) Master Franchisee Abandons the Franchise by failing to operate the BHC Restaurant for five consecutive business days during which Master Franchisee is required to operate the business under the terms of this Agreement, or any shorter period after which it is not unreasonable under the facts and circumstances for Franchisor to conclude that Master Franchisee does not intend to continue to operate the Franchise, unless such failure to operate is due to fire, flood, earthquake or other similar causes beyond Master Franchisee's control;
- (iii) Franchisor and Master Franchisee agree in writing to terminate the Franchise;
- (iv) Master Franchisee makes any material misrepresentations relating to the acquisition of the Franchise or Master Franchisee engages in conduct that reflects materially and unfavorably upon the operation and reputation of the Franchised Business or the System;
(v) Master Franchisee fails after notification of noncompliance, to comply timely with any federal, state, or local law or regulation, including, but not limited to, all health, safety, building, and labor laws or regulations applicable to the operation of the Franchise;
(vi) After curing any failure in accordance with section 13.3 below, Master Franchisee engages in the same noncompliance whether or not such noncompliance is corrected after notice;
(vii) Master Franchisee repeatedly fails to comply with one or more material requirements of this Agreement, whether or not corrected after notice;
Source: Item 23 — Receipts (FDD pages 52–230)
What This Means (2025 FDD)
According to Bhc's 2025 Franchise Disclosure Document, the Multi-Unit Master Franchise Agreement can be terminated immediately by the Franchisor, without opportunity to cure, under several specific conditions. These include situations where the Master Franchisee admits inability to pay debts, becomes subject to bankruptcy proceedings, is judicially determined to be insolvent, or assigns assets for the benefit of creditors. Bhc can also terminate the agreement if the Master Franchisee abandons the franchise by failing to operate the BHC Restaurant for five consecutive business days, unless due to circumstances beyond their control such as natural disasters. Termination is also possible if both Bhc and the Master Franchisee agree to terminate the franchise in writing.
Further grounds for immediate termination involve the Master Franchisee making material misrepresentations during the franchise acquisition or engaging in conduct that negatively impacts the franchise's reputation. Failure to comply with federal, state, or local laws and regulations, including health, safety, building, and labor laws, can also lead to termination. Additionally, if the Master Franchisee repeats the same noncompliance after initially curing it, or repeatedly fails to comply with material requirements of the agreement, Bhc reserves the right to terminate the agreement.
These termination clauses are designed to protect Bhc's brand and ensure compliance with legal and operational standards. For a prospective franchisee, these terms highlight the importance of maintaining financial stability, adhering to all applicable laws, and upholding the brand's reputation. It is also important to note that in California, the Multi-Unit Master Franchise Agreement provides for termination upon bankruptcy, but this provision may not be enforceable under federal bankruptcy law.
It is important for potential franchisees to fully understand these termination conditions, as they represent significant obligations and potential risks. Franchisees should seek legal counsel to clarify their rights and responsibilities under the Multi-Unit Master Franchise Agreement, particularly concerning termination clauses and their implications.