What compliance obligations does a Bonchon Area Developer have to meet to receive the incentives described in Sections 2 and 3 of this Rider?
Bonchon Franchise · 2025 FDDAnswer from 2025 FDD Document
r assistance.
- Continuing Royalty. The first paragraph of Section 5.02 of each franchise agreement signed pursuant to the Area Development Agreement and where the subject Restaurant opens and commences operations in accordance with the conditions set forth herein below will be amended to read as follows:
From the opening date of your Bonchon Restaurant and continuing through the end of your Bonchon Restaurant's first full twelve months of operations, you agree (subject to the terms and conditions of the Area Development Agreement Rider – 2025 Development Incentive Program which you have executed in connection with this Agreement) to pay us a weekly Continuing Royalty equal to 2.5% of your previous week's Gross Revenues, as defined in Section 5.05 ("Definition of Gross Revenue"). After your Restaurant's first full twelve months of operations and continuing through the remainder of the Initial Term of the Franchise Agreement, you agree to pay us a weekly Continuing Royalty equal to 5.0% of your previous week's Gross Revenues. The Continuing Royalty is solely in consideration of our granting you the franchise conferred by this Agreement and is not in exchange for any particular goods, services or assistance we may furnish you.
-
- Conditions. Area Developer acknowledges, understands and expressly agrees that for Area Developer (or its approved franchisee affiliate, as applicable) to receive the incentives described in Section 2 and 3 of this Rider for a Restaurant development under the Area Development Agreement, each of the following conditions must be satisfied:
- a. The subject Restaurant opens to the general public and commences regular operations no later than its Scheduled Opening Date as reflected in Section 6.01 of the Area Development Agreement;
- b. Area Developer is in full compliance with the Area Development Agreement and all other agreements with Franchisor and its affiliates: and
c. Area Developer (and each of its approved franchisee affiliates) operating franchised Businesses pursuant to the Area Development Agreement or otherwise (each, an "Affiliate Franchisee") is in full compliance with its respective franchise agreements and all other agreements with Franchisor or its affiliates.
If any of the conditions outlined above for any Restaurant are not met, then Area Developer (or its approved franchisee affiliate, as applicable) will forfeit all incentives offered by this Rider in relation to the subject Restaurant.
Source: Item 23 — RECEIPTS (FDD pages 92–536)
What This Means (2025 FDD)
According to Bonchon's 2025 Franchise Disclosure Document, an Area Developer must meet specific conditions to receive the incentives described in Sections 2 and 3 of the Franchise Agreement Rider – 2025 Development Incentive Program. These conditions include ensuring that each restaurant opens to the public and begins regular operations no later than its Scheduled Opening Date, as detailed in Section 6.01 of the Area Development Agreement.
Additionally, the Area Developer must be in full compliance with the Area Development Agreement and all other agreements with Bonchon and its affiliates. This encompasses maintaining good standing in all contractual obligations and adherence to the operational standards set forth by Bonchon. Furthermore, the Area Developer and any approved franchisee affiliates operating franchised businesses must also be in full compliance with their respective franchise agreements and all other agreements with Bonchon or its affiliates.
Failure to meet any of these conditions for any restaurant will result in the Area Developer forfeiting all incentives offered by the Rider for that specific restaurant. In such cases, the Area Developer will be obligated to pay the standard Initial Franchise Fee and Continuing Royalty, as outlined in Sections 5.01 and 5.02 of the franchise agreement. This includes paying the difference between the reduced Initial Franchise Fee of $20,000 and Bonchon's then-applicable standard Initial Franchise Fee, as well as the standard royalty fee of 5% of the restaurant's prior week's Gross Revenues for the entire term of the franchise agreement.
These incentives are also non-transferable, meaning that if the Area Development Agreement or any associated franchise agreement is transferred, either directly or indirectly, the incentives described in the Rider will immediately terminate. This provision ensures that the benefits of the incentive program remain with the original Area Developer who committed to the development plan. Bonchon's requirements are designed to ensure that Area Developers are committed to fulfilling their development obligations and maintaining compliance with all agreements.