Under the Bhc Master Franchise Agreement, what is the Master Franchisee's obligation regarding the approval process for potential subfranchisees?
Bhc Franchise · 2025 FDDAnswer from 2025 FDD Document
g from time to time.
You will be required to conduct an approval process, including a background check, to confirm that each potential subfranchisee and each potential BHC Restaurant meet all of our then current minimum requirements for new subfranchisees and new BHC Restaurants, as the same may be amended, replaced or supplemented by us from time to time. We also have the right, upon written notice to you, at our sole discretion, to approve or disapprove any or all potential subfranchisees and potential BHC Restaurants. You may not directly operate any BHC Restaurant under the MFA, but may only do so through an affiliate that enters into a Franchise Agreement with BHC. A "Affiliate Franchised BHC Restaurant" means a BHC Restaurant that is or will be established and operated by an affiliate of the Master Franchisee, and a "Subfranchised BHC Restaurant" means a BHC Restaurant that is or will be established and operated by a Subfranchisee that is a third party and not your affiliate.
In order to maintain your Development Rights under the MFA, you must establish and operate the cumulative number of Master Franchised BHC Restaurants (including Affiliate Franchised BHC Restaurants and Subfranchised BHC Restaurants) in the Development Area by the dates specified in the applicable development schedule, as further described in Item 12. In addition, you must establish and operate at least one (1) Affiliate Franchised BHC Restaurant within the Development Area pursuant to a separate then-current Franchise Agreement before you may grant subfranchises to third parties for the establishment and operation of Subfranchised BHC Restaurants within the Development Area.
Source: Item 1 — The Franchisor, And Any Parents, Predecessors, And Affiliates (FDD pages 7–10)
What This Means (2025 FDD)
According to Bhc's 2025 Franchise Disclosure Document, as a Master Franchisee, you are required to conduct an approval process for potential subfranchisees and BHC Restaurant locations. This process includes a background check to ensure that they meet Bhc's minimum requirements for new subfranchisees and restaurant locations. These requirements can be amended or supplemented by Bhc from time to time.
Bhc also retains the right to approve or disapprove any or all potential subfranchisees and restaurant locations at its sole discretion, providing written notice of their decision. This means that even if a subfranchisee meets your initial screening criteria, Bhc has the final say in their approval. You are also responsible for preparing the subfranchise agreement and any other related agreements, but these must receive prior written approval from Bhc, and you cannot modify the terms of these documents without Bhc's approval.
These stipulations ensure that Bhc maintains control over the quality and standards of its franchise system, even when operating through master franchisees. As a master franchisee, you act as an intermediary, but Bhc retains ultimate authority over subfranchisee selection and agreement terms. This dual-approval process is designed to protect the brand and ensure consistency across all Bhc locations.
Furthermore, the subfranchise agreement and other related agreements must align with the Master Franchise Agreement and any guidelines prescribed by Bhc. This includes stipulations such as the maximum size of the territory granted under any subfranchise agreement. This ensures that all subfranchise agreements are consistent with the overall franchise strategy and do not infringe upon other franchisees' territories or rights.