If a Burger King franchisee commits an act of default, what options does BKC have?
Burger_King Franchise · 2025 FDDAnswer from 2025 FDD Document
[Item 22: CONTRACTS]
- (14) Conviction of either Franchisee or the Managing Owner in a court of competent jurisdiction of (i) an indictable offense punishable by a term of imprisonment in excess of one (1) year, (ii) any offense, regardless of how punishable, for which a material element is fraud, dishonesty or moral turpitude, or (iii) any other crime or offense arising from or related to the operation of the Franchised Restaurant, other franchised BURGER KING Restaurants, the BURGER KING Restaurant business of the Franchisee or any other business of the Franchisee or Managing Owner that BKC believes is reasonably likely to have an adverse effect on the BURGER KING System, the BURGER KING Marks, or the good will associated therewith in the geographical area where the Franchised Restaurant is located.
If this act of default shall occur, BKC shall have the right to terminate this Agreement, such termination to be effective upon notice to Franchisee and with no opportunity to cure.
- (15) Franchisee or any Owner uses or duplicates the BURGER KING System or engages in unfair competition in violation of Section 12 of this Agreement or discloses any trade secrets of BKC in violation of Section 11.A(1) of this Agreement.
If this act of default shall occur, BKC shall have the right to terminate this Agreement, such termination to be effective upon notice to Franchisee but with no opportunity to cure.
(16) Franchisee denies BKC the right to inspect the Franchised Restaurant or to audit the sales and accounting records of the Franchised Restaurant.
(17) Conduct by Franchisee or the Managing Owner which is deleterious to or reflects unfavorably on Franchisee or the BURGER KING System by exhibiting a reckless disregard for the physical and mental well being of employees, customers, BKC representatives or the public at large including battery, assault, sexual harassment or other forms of threatening, outrageous, willfully discriminatory or unacceptable behavior.
An act of default under this Section 18.A.(17) does not require any criminal action to be brought against Franchisee or the Managing Owner.
If this act of default shall occur, BKC shall have the right to terminate this Agreement, such termination to be effective upon notice to Franchisee and with no opportunity to cure.
[Item 22: CONTRACTS]
The failure of BKC to terminate this Agreement upon the occurrence of one or more acts of default will not constitute a waiver or otherwise affect the right of BKC to terminate this Agreement because of a continuing or subsequent failure to cure one or more of the aforesaid acts of default or any other default.
B. Effect of Termination
- (1) Upon termination or expiration of this Agreement, Franchisee's right to use the BURGER KING Marks and the BURGER KING System shall terminate. Franchisee shall not thereafter identify itself as a BURGER KING franchisee or publicly identify itself as a former BURGER KING franchisee or use any of BKC's trade secrets, promotional materials, the BURGER KING Marks or any mark confusingly similar, nor shall Franchisee disclose any of BKC's trade secrets. Upon termination or expiration of this Agreement, Franchisee will immediately return to BKC the MOD Manual loaned to it, together with all other material containing trade secrets.
- (2) Franchisee grants to BKC, upon termination or expiration of this Agreement, the option to purchase all usable paper goods, containers and printed menus bearing the BURGER KING Marks at Franchisee's cost, and to purchase the restaurant equipment, furniture, fixtures and signs at fair market value.
- (3) If the parties do not enter into a Successor Franchise Agreement, Franchisee agrees to immediately upon termination or expiration of this Agreement, make such removals or changes in signs and the building as BKC shall request, so as to effectively distinguish the building and Premises from its former appearance and from any other BURGER KING Restaurant. In the event Franchisee fails to make the changes, Franchisee consents to BKC entering the building and Premises to make non-structural changes at Franchisee's expense.
- (4) In the event of termination for any default of Franchisee, any damage suffered by BKC shall be a lien in favor of BKC against the personal property, machinery, fixtures and equipment owned by Franchisee on the Premises at the time of default.
- (5) The foregoing shall be in addition to any other rights or remedies of BKC that exist under statute, regulation or common law.
19. RESTRICTIVE COVENANT; GUARANTY OF OBLIGATIONS
[Item 22: CONTRACTS]
If Franchisee after receiving such notice, subsequently breaches this Agreement in any manner, BKC shall have the right to terminate this Agreement upon notice with no further opportunity to cure.
(24) The acquisition of an interest in a restaurant business in violation of Section 19 of this Agreement.
(25) Failure by Franchisee to conduct the business of the Franchised Restaurant in compliance with all laws and regulations as required under Section 21.C.(3) of this Agreement.
(26) Failure by Franchisee to comply with any other provisions of this Agreement or, the lease for the Premises or any other agreement relating to the Franchised Restaurant.
Franchisee shall have sixty (60) days after notice to cure the default.
- (27) Any false or misleading representation of Franchisee or the Owners with respect to the Franchise Entity Application (including any representation regarding the uses of equity capital raised pursuant to the Franchise Entity Application) or Franchisee or any Owner fails in any undertaking pursuant to the Franchise Entity Application. If this act of default shall occur, BKC shall have the right to terminate this Agreement, effective immediately upon notice to Franchisee and without opportunity to cure.
- (28) The insurance required herein is cancelled or is threatened to be cancelled. Franchisee shall have five (5) days after notice to cure the default.
- (29) At the time measured by BKC, which measurement shall occur on a quarterly basis as set forth in BKC's then current BURGER KING® North America Financial Policy (the "Financial Policy"), Franchisee fails to meet the minimum financial criteria set forth in the Financial Policy. Franchisee shall have one hundred eighty (180) days after notice to cure the default.
- (30) Failure by Franchisee to comply with any of the requirements related to the Managing Owner including any of the requirements set forth in Section 3.A., or failure by the Managing Owner to comply with any of the requirements related to the Managing Owner including any of the requirements set forth in Sections 3.A. and 5.K.
[Item 22: CONTRACTS]
If this act of default shall occur, BKC shall have the right to terminate this Agreement, such termination to be effective upon notice to Franchisee and with no opportunity to cure.
- (18) Failure by Franchisee to make prompt payment of undisputed bills, invoices or statements from suppliers of goods or services to the Franchised Restaurant and lenders, landlords or other vendors of the Franchisee.
Franchisee shall have sixty (60) days after notice to cure the default.
- (19) Any sale, assignment, merger or transfer in violation of Sections 15 or 16 of this Agreement including a change of Control of Franchisee which occurs by means of a tender offer for publicly-traded securities of Franchisee or at the direction of a receiver or trustee in bankruptcy.
If this act of default shall occur, BKC shall have the right to terminate this Agreement effective upon notice to Franchisee without opportunity to cure.
Failure by Franchisee to effect a transfer of an Owner's interest in accordance with Section 15.L. of this Agreement shall be a transfer in violation of Section 15 for purposes of this Section 18.A.(19).
(20) Franchisee, without the written consent of BKC, enters into a management agreement or consulting arrangement relating to the Franchised Restaurant.
(21) Failure to restore the Franchised Restaurant after damage or destruction as provided in Section 7 of this Agreement.
(22) The submission by Franchisee, Managing Owner, or any other Owner of any application and/or management commitment form and/or other form or report which contains any false or misleading material statement or omits any material fact.
If this act of default occurs, BKC shall have the right to terminate this Agreement, such termination to be effective upon notice to Franchisee but with no opportunity to cure.
- (23) Repeated breaches of provisions of this Agreement.
If BKC intends to terminate this Agreement under this Section 18.A.(23), BKC shall provide notice to Franchisee that BKC considers that Franchisee has repeatedly breached this Agreement, and that BKC intends to terminate this Agreement if Franchisee breaches the Agreement at any time after said notice.
If Franchisee after receiving such notice, subsequently breaches this Agreement in any manner, BKC shall have the right to terminate this Agreement upon notice with no further opportunity to cure.
Source: Item 22 — CONTRACTS (FDD pages 125–127)
What This Means (2025 FDD)
According to Burger King's 2025 Franchise Disclosure Document, BKC has several options when a franchisee commits an act of default. These options vary depending on the specific default. In some instances, BKC has the right to terminate the franchise agreement immediately upon notice, without any opportunity for the franchisee to cure the default. Examples of defaults that trigger immediate termination include a conviction of the franchisee or managing owner for certain crimes, misuse of the Burger King system or disclosure of trade secrets, denial of inspection rights to BKC, conduct that is harmful to the Burger King system, false representations on the Franchise Entity Application, and any sale, assignment, merger or transfer in violation of Sections 15 or 16 of the agreement.
In other cases, Burger King provides the franchisee an opportunity to cure the default within a specified period. For instance, a franchisee has 60 days to cure defaults such as failure to comply with the franchise agreement, the lease for the premises, or any other agreement related to the franchised restaurant, as well as failure to make prompt payments to suppliers. A franchisee has five days to cure a default if the required insurance is canceled or threatened to be canceled. Furthermore, a franchisee has 180 days to meet the minimum financial criteria set forth in Burger King's North America Financial Policy.
Additionally, if a franchisee repeatedly breaches the franchise agreement, Burger King can provide notice that any subsequent breach will result in immediate termination. The failure of Burger King to terminate the agreement upon one default does not waive its right to terminate for continuing or subsequent defaults. Upon termination or expiration of the agreement, the franchisee's right to use Burger King's marks and system ends, and the franchisee must return all materials containing trade secrets. Burger King also has the option to purchase the franchisee's paper goods and restaurant equipment.
These provisions are typical in franchise agreements, as they protect the franchisor's brand and system standards. A prospective Burger King franchisee should carefully review these default and termination clauses to understand their obligations and the potential consequences of non-compliance. Understanding these terms is crucial for managing the risks associated with operating a Burger King franchise and maintaining a good relationship with the franchisor.