Does the cessation of liability of the Area Developer automatically relieve the Bonchon guarantors from liability?
Bonchon Franchise · 2025 FDDAnswer from 2025 FDD Document
The cessation of or release from liability of Area Developer or any of the undersigned shall not relieve any other Guarantors from liability hereunder, under the Area Development Agreement, or under any other agreement(s) between Franchisor and Area Developer, except to the extent that the breach or default has been remedied or moneys owed have been paid.
Any waiver, extension of time or other indulgence granted by Franchisor or its agents, successors or assigns, with respect to the Area Development Agreement or any other agreement(s) by and between Area Developer and Franchisor, shall in no way modify or amend this Guarantee, which shall be continuing, absolute, unconditional and irrevocable.
Source: Item 23 — RECEIPTS (FDD pages 92–536)
What This Means (2025 FDD)
According to Bonchon's 2025 Franchise Disclosure Document, the cessation of liability of the Area Developer does not automatically relieve the Bonchon guarantors from liability. The guarantee provided by the guarantors is designed to be continuing, absolute, unconditional, and irrevocable, ensuring that Bonchon can seek recourse directly from the guarantors without first pursuing the Area Developer. This protects Bonchon in case the Area Developer defaults on their obligations.
The FDD specifies that the franchisor may proceed directly against any or each of the guarantors without first proceeding against the Area Developer. This means Bonchon is not obligated to exhaust all remedies against the Area Developer before seeking fulfillment of the obligations from the guarantors. The guarantors remain liable under the Area Development Agreement and any other agreements between the Area Developer and Bonchon, even if the Area Developer's liability ceases.
However, there is an exception: the guarantors may be relieved from liability to the extent that the breach or default has been remedied or the moneys owed have been paid. This implies that if the Area Developer cures the default or pays the outstanding amounts, the guarantors' liability is reduced accordingly. This provision ensures that the guarantors are not held responsible for obligations that have already been satisfied. Therefore, prospective franchisees acting as guarantors should understand the extent of their obligations and the conditions under which they may be relieved of liability.