What are the consequences if a Bonchon franchisee does not comply with the non-compete covenant, violates confidentiality restrictions, or fails to obtain required additional covenants?

According to Bonchon's 2025 Franchise Disclosure Document, failure to comply with the non-compete covenant, violating confidentiality restrictions, or not obtaining required additional covenants constitutes a breach of the Franchise Agreement. Specifically, Item 23 outlines various conditions under which Bonchon may terminate the franchise agreement.

One of these conditions is if the franchisee does not comply with the covenant not to compete during the term of the Franchise Agreement, violates the restrictions pertaining to the use of Confidential Information contained in the Agreement, or does not obtain the execution of the additional covenants required by the Agreement. This means Bonchon has grounds to terminate the agreement if a franchisee engages in competitive activities during the franchise term, misuses confidential information, or fails to secure the necessary non-compete and confidentiality agreements from relevant personnel.

Furthermore, Bonchon emphasizes the importance of protecting its confidential information and enforcing non-competition agreements. The FDD states that franchisees must require and obtain the execution of Bonchon's Confidentiality/Non-Competition Agreement from their Operating Principal (if such individual has an ownership interest), owners, equity holders, control persons, shareholders, members, partners and general partner(s); all officers, directors and managers; and all persons possessing equivalent positions in any business entity which directly or indirectly owns and/or controls them. Franchisees must also obtain the execution of Bonchon's Confidentiality Agreement from their Operating Principal (if such individual does not hold an ownership interest), General Manager, Area Manager and all other managerial staff before their employment or promotion.

Bonchon also requires franchisees to vigorously prosecute breaches of any Confidentiality/Non-Competition Agreement executed by any of the individuals referenced in Section 12.05, and acknowledges Bonchon's right to enforce the terms of any such executed Confidentiality/Non-Competition Agreement. Even if an individual employed, engaged or otherwise serving the franchised Bonchon Business who has not executed a Confidentiality/Non-Competition Agreement breaches the substantive provisions of Bonchon's Confidentiality/Non-Competition Agreement, the franchisee must vigorously prosecute such conduct to the fullest extent permitted by law. This demonstrates the serious implications and potential legal ramifications for franchisees who fail to uphold these critical aspects of the franchise agreement.