Under what condition would the Bhc Lease be assigned to and accepted by the Franchisor?
Bhc Franchise · 2025 FDDAnswer from 2025 FDD Document
- (g) Unless otherwise agreed to in writing by Franchisee and Franchisor, Franchisee has the sole responsibility for locating, securing, and obtaining suitable premises for Franchisee's Franchised BHC Restaurant.
Franchisee and Franchisee's landlord will be required by Franchisor to execute an addendum to Franchisee's lease (or other written agreement or written understanding incorporated in, or attached as a rider to, the lease) that (i) grants Franchisor an option to assume Franchisee's position as lessee under the lease for the Franchised BHC Restaurant premises if Franchisee is in material breach of either the lease for the Franchised BHC Restaurant premises (including an obligation of the landlord to notify Franchisor if Franchisee is in such breach) or this Agreement, (ii) grants Franchisor the right to assign the lease to a bona fide franchisee of the System after assuming the lease, and (iii) requires the landlord to fully cooperate with Franchisor in completing de-identification of the Franchised BHC Restaurant if this Agreement is terminated or expires without being renewed and Franchisor does not exercise its option to assume the lease for the Franchised BHC Restaurant premises.
The Addendum to Lease is attached as Exhibit 5.
Source: Item 23 — Receipts (FDD pages 52–230)
What This Means (2025 FDD)
According to Bhc's 2025 Franchise Disclosure Document, the lease agreement between the franchisee (Tenant) and the landlord includes an addendum that outlines the conditions under which Bhc may assume the lease. Specifically, Bhc has the option to assume the franchisee's position as lessee if the franchisee is in material breach of the lease or the Franchise Agreement. This provision ensures that Bhc can maintain control over the restaurant location and continue operations if a franchisee fails to meet their obligations. The landlord is obligated to notify Bhc if the franchisee is in such breach, triggering Bhc's option to assume the lease.
Furthermore, the addendum grants Bhc the right to assign the lease to another qualified Bhc franchisee after assuming it. This allows Bhc to ensure the continued operation of a Bhc restaurant at the location by transferring the lease to a new franchisee. The landlord is required to cooperate with Bhc in this process. If the Franchise Agreement is terminated or expires without renewal and Bhc chooses not to assume the lease, the addendum requires the landlord to fully cooperate with Bhc in de-identifying the restaurant, removing Bhc signage and branding to protect the Bhc brand and system.
In the event that Bhc elects to assume the lease, the franchisee remains liable for all responsibilities and obligations, including any amounts owed to the landlord, prior to the date of the lease assignment. Additionally, the franchisee continues to be liable for all obligations under the lease, even after Bhc assumes it. However, Bhc is entitled to recover from the franchisee any amounts it pays to the landlord to cure the franchisee's defaults under the lease, including interest and reasonable collection costs. Upon taking possession of the premises, Bhc is required to cure any defaults specified by the landlord within the given timeframes and must execute and deliver to the landlord its assumption of the franchisee's rights and obligations under the lease. Bhc is bound by all duties and obligations of the lease applicable to the franchisee, except that Bhc may choose not to assume or be bound by any amendments to the lease executed by the franchisee without Bhc's prior written approval, which will not be unreasonably withheld or delayed.
These provisions in the lease addendum are designed to protect Bhc's interests and ensure the continuity of the franchise system. By having the option to assume the lease under certain conditions, Bhc can maintain control over key locations and safeguard its brand. The franchisee should understand these conditions and their ongoing liabilities even if the lease is assumed by Bhc.