Under what conditions can Bhc use the deposit from a master franchisee?

According to Bhc's 2025 Franchise Disclosure Document, Bhc reserves the right to use the deposit from a master franchisee to compensate for damages and expenses in certain situations. This is because a master franchisee's failure to comply with their obligations under the Master Franchise Agreement (MFA) may cause immediate and substantial damage to Bhc's interests, as well as cause Bhc to incur administrative and other expenses.

If Bhc deducts any amount from the deposit, the master franchisee is required to replenish the deposit to its original amount within 10 business days of each deduction. This ensures that the deposit remains at the agreed-upon level, providing ongoing security for Bhc.

This clause is important for prospective master franchisees to understand, as it outlines the conditions under which Bhc can access the deposit and the franchisee's obligation to replenish it. It highlights the financial responsibility a master franchisee has to Bhc and the potential for the deposit to be used to cover damages or expenses resulting from non-compliance with the MFA. This is a fairly standard practice in franchising, where deposits or performance bonds are often used to protect the franchisor's interests and ensure compliance with the franchise agreement.