What constitutes 'Damages' that a defaulting Bonchon franchisee must pay?
Bonchon Franchise · 2025 FDDAnswer from 2025 FDD Document
If we terminate this Agreement because of your default or you terminate same through failure to make payment following notice and opportunity to cure (pursuant to Section 17.04), you must pay us all losses and expenses we incur as a result of the default or termination, including all damages, costs, expenses, and reasonable attorneys' and experts' fees directly or indirectly related thereto, such as (without limitation) lost profits, lost opportunities, damage inuring to our Proprietary Marks and reputation, travel and personnel costs and the cost of securing a new Business at or proximate to the Restaurant Location (collectively, the "Damages").
This obligation will give rise to and remain, until paid in full, a lien in our favor against any and all of assets, property, furnishings, equipment, signs, fixtures and inventory owned by you or the franchised Business at the time of termination and against any of your money which we are holding or which is otherwise in our possession.
Source: Item 23 — RECEIPTS (FDD pages 92–536)
What This Means (2025 FDD)
According to Bonchon's 2025 Franchise Disclosure Document, 'Damages' that a defaulting franchisee must pay encompass all losses and expenses Bonchon incurs due to the default or termination. This includes, but is not limited to, damages, costs, expenses, and reasonable attorneys' and experts' fees directly or indirectly related to the default or termination. Specific examples of damages include lost profits, lost opportunities, damage to Bonchon's Proprietary Marks and reputation, travel and personnel costs, and the cost of securing a new Business at or near the Restaurant Location.
This obligation creates a lien in Bonchon's favor against the franchisee's assets, property, furnishings, equipment, signs, fixtures, and inventory owned by the franchisee or the franchised Business at the time of termination. It also extends to any of the franchisee's money held by or in Bonchon's possession.
Bonchon also has the option to seek 'Liquidated Damages' instead of 'actual Damages'. Liquidated damages are calculated based on a formula using the average Continuing Royalties owed to Bonchon during the 12 months of operation preceding the termination date, multiplied by either 24 (representing two full years) or the number of months remaining in the Franchise Agreement term, whichever is less. This liquidated damages payment is intended to compensate Bonchon for damages resulting from the premature termination of the agreement but does not waive Bonchon's right to claim other damages or equitable relief resulting from the breach of the agreement.
Prospective Bonchon franchisees should be aware of these potential financial obligations in the event of a default or termination, as they could significantly impact their financial standing. It is important to fully understand the circumstances under which these damages may be imposed and to assess the potential risks associated with the franchise agreement.