Does the Bonchon confidentiality agreement prevent me from engaging in any other business during my association?
Bonchon Franchise · 2025 FDDAnswer from 2025 FDD Document
I further agree that during the term of my employment/service/association/ownership participation, and under the circumstances set forth in the following paragraph I will not, directly or indirectly, engage or participate in any other business which engages in any of the activities which the Area Development Agreement contemplates will be engaged in by Area Developer under the Franchise Agreements; or, which offers or sells any other service, product or component which now or in the future is part of the Bonchon System, or any confusingly similar product or service. I agree that I am prohibited from engaging as a proprietor, partner, investor, shareholder, director, officer, employee, principal, agent, advisor, or consultant in any other business or activity which offers or sells (or grants franchises or licenses to third parties to operate businesses that offer or sell) Korean fried chicken or that serves chicken as a primary menu item. For the purposes of this section, a business that serves chicken as a primary menu item is defined as a business that derives 25% or more of its gross revenues from selling chicken (a "Competitive Business").
Unless specifically prohibited by applicable law, for a period of two years immediately following the later of (a) the expiration or termination of my employment/service/association/ownership participation or (b) ) the date on which I begin to comply with the terms and conditions of this Agreement, I am prohibited from engaging in any Competitive Business, if the other business is located within Area Developer's Development Territory, within twenty miles of the boundaries of Area Developer's Development Territory, or within twenty miles of (or within) any other Development Territory or Business Territory (whether Company-owned, franchised or otherwise established and operated).
It is the intention of these provisions to preclude not only direct competition but also all forms of indirect competition, such as consultation for Competitive Businesses, service as an independent contractor for Competitive Businesses, or any assistance or transmission of information of any kind which would be of any material assistance to a competitor. Nothing herein will prevent me from owning for investment purposes up to an aggregate of 5% of the capital stock of any Competitive Business, so long as the Competitive Business is a publicly held corporation whose stock is listed and traded on a national or regional stock exchange, or through the National Association of Securities Dealers Automated Quotation System (NASDAQ), and so long as I or Area Developer do not control the company in question.
Source: Item 23 — RECEIPTS (FDD pages 92–536)
What This Means (2025 FDD)
According to Bonchon's 2025 Franchise Disclosure Document, the confidentiality and non-competition agreements place restrictions on a franchisee's ability to engage in other business activities, both during the term of the agreement and for a period after its termination. During the term of the agreement, franchisees are prohibited from participating in any other business that engages in activities contemplated by the Area Development Agreement or that offers services or products similar to the Bonchon System. Specifically, franchisees cannot be involved in any business that offers or sells Korean fried chicken or derives 25% or more of its gross revenues from selling chicken, which is defined as a "Competitive Business".
Post-termination, for two years, the franchisee is restricted from engaging in any Competitive Business within their Development Territory, within twenty miles of the perimeter of their Development Territory, or within twenty miles of any Bonchon Business. These restrictions aim to prevent both direct and indirect competition, including consultation or service as an independent contractor for Competitive Businesses. However, franchisees are allowed to own up to 5% of the capital stock of a Competitive Business if it is a publicly held corporation listed on a national stock exchange, provided they do not control the company.
Bonchon also requires franchisees to ensure that certain individuals, such as Operating Principals and equity holders, execute Confidentiality/Non-Competition Agreements. These agreements must be provided to Bonchon within ten days of execution. The franchisor emphasizes the importance of enforcing these agreements and retains the right to enforce them independently. Furthermore, the organizational documents of a franchisee's business entity must state that the entity's sole purpose is to operate a Bonchon franchise, restricting engagement in other business activities.