Under what conditions can a default by a Bhc Master Franchisee under a lease or sublease be considered a material default of every agreement with the Bhc franchisor?
Bhc Franchise · 2025 FDDAnswer from 2025 FDD Document
15.3 Cross-Defaults.
Any default by Master Franchisee (or any person/company or Affiliated Entity) under the terms and conditions of this Agreement or any lease or sublease, or any other agreement between Franchisor or its affiliate, and Master Franchisee, 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, the 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.
Source: Item 23 — Receipts (FDD pages 52–230)
What This Means (2025 FDD)
According to Bhc's 2025 Franchise Disclosure Document, a default by a Master Franchisee under the terms of any lease or sublease can trigger a cross-default, impacting all agreements with Bhc. Specifically, any default by the Master Franchisee, their company, or any affiliated entity under the Master Franchise Agreement (MFA), any lease or sublease, or any other agreement with Bhc or its affiliates, is considered a material default across all agreements.
This cross-default provision means that if a Bhc Master Franchisee fails to meet their obligations under a lease agreement for a restaurant location, it is not just a breach of that lease. It is automatically considered a major breach of the Master Franchise Agreement itself and any other agreements in place with Bhc. This gives Bhc the right to terminate all agreements with the Master Franchisee, not just the one directly related to the lease default.
For a prospective Bhc Master Franchisee, this clause represents a significant risk. A seemingly isolated issue, such as a dispute with a landlord or a temporary inability to pay rent, could have far-reaching consequences, potentially leading to the loss of the entire franchise. The franchisee should carefully review all lease terms and ensure they have sufficient financial resources to meet their lease obligations to avoid triggering this cross-default provision. They should also seek legal counsel to fully understand the implications of this clause and negotiate for more favorable terms if possible.