Under what circumstances related to building improvement funds can Burger King franchisees be reimbursed for replacement costs?
Burger_King Franchise · 2025 FDDAnswer from 2025 FDD Document
en due (i.e., on the first day of each month during the Term of this Lease) shall not accrue any interest until the following calendar month. Interest accrued or earned on the Building Improvement Funds shall become a part of the Building Improvement Funds and be subject to the terms hereof. Lessor shall report all interest earned on the Building Improvement Funds for the account of Lessee and Lessee shall execute and provide to Lessor a W-9 form and any other form required by Lessor for this purpose.
§6.3 USE OF BUILDING IMPROVEMENT FUNDS. The Building Improvement Funds shall be used to reimburse Lessee for the cost of any "Building Improvement(s)" (as that term is defined below). All reasonable costs, expenses. and fees associated with any Building Improvements shall hereinafter be referred to as the "Replacement Costs." Without limiting the effect of any provision hereof, unless otherwise specifically agreed to by Lessor in writing, the Building Improvement Funds shall not be used to pay for any costs of repairing or maintaining the Premises under Section 5.2 of this Lease. The judgment and determination of Lessor as to whether a cost or expense incurred by Lessee is a "Replacement Cost" within the meaning contemplated by this Article VI shall be final and conclusive.
As used herein the term "Building Improvement" shall mean any of the following:
- (a) the replacement of the entire air conditioning system including heating unit(s) for the Premises;
- (b) the replacement of the entire mansard roof, facia, soffit and related roofing structural components of the Premises;
- (c) the replacement of the entire asphalt parking lot overlay located on the Premises; and
- (d) the painting of the entire exterior surface of the Building.
The judgment and determination of Lessor as to whether an improvement to the Premises is a "Building Improvement" within the meaning contemplated by this Article VI shall be final and conclusive.
Lessee agrees that it will, at its own cost and expense, make any and all Building Improvements to the Premises as may be requested by Lessor from time to time. Lessee understands and agrees that Lessor may, in its sole and absolute discretion, require the same Building Improvement to be performed by Lessee on more than one occasion during the Term of the Lease, notwithstanding the balance of the Building Improvement Funds held by Lessor. Said Building Improvements must be completed by Lessee within the time periods specified by Lessor. Lessee shall not at any time make any Building Improvement to the Premises without the prior written consent of Lessor.
All approved Building Improvements shall be performed by Lessee in accordance with Section 5.3 of this Lease. Lessee shall be solely responsible for the payment of all Replacement Costs, as well as any increase in real estate taxes or assessments levied, certified and/or pending against the Premises resulting from the Building Improvements.
Source: Item 20 — OUTLETS AND FRANCHISEE INFORMATION (FDD pages 109–124)
What This Means (2025 FDD)
According to Burger King's 2025 Franchise Disclosure Document, franchisees (referred to as 'Lessee' in the context of building improvements) may be reimbursed for 'Replacement Costs' from the Building Improvement Funds. These costs are associated with 'Building Improvements,' which are specifically defined as:
- Replacement of the entire air conditioning system, including heating units.
- Replacement of the entire mansard roof, facia, soffit, and related roofing structural components.
- Replacement of the entire asphalt parking lot overlay.
- Painting of the entire exterior surface of the building.
To receive reimbursement, the Burger King franchisee must request it in writing from the Lessor (Burger King) within thirty (30) days after completing a Building Improvement. However, the FDD stipulates that Burger King, as the Lessor, has the final say on whether a cost qualifies as a 'Replacement Cost' or whether an improvement qualifies as a 'Building Improvement.' The Building Improvement Funds cannot be used for general repairs or maintenance under Section 5.2 of the lease unless Burger King agrees otherwise in writing. The franchisee is responsible for paying all Replacement Costs initially and any increases in real estate taxes resulting from the improvements.