In the context of a Bonchon franchisee's bankruptcy, what constitutes 'adequate assurance of future performance' by a proposed assignee of the franchise agreement?
Bonchon Franchise · 2025 FDDAnswer from 2025 FDD Document
"Adequate assurance of future performance", as used above, shall mean that we shall have been furnished with specific evidence that any proposed assignee of this Agreement can and will comply with all operational and other performance requirements, and with all conditions, obligations, duties, covenants and requirements of a franchisee under: (i) this Agreement; (ii) the standard form Franchise Agreement then being offered to our franchisees; (iii) such other ancillary agreements as we may require; and (iv) any of our policies describing our franchisees' duties, obligations, conditions, covenants or performance requirements. You understand and agree that adequate assurance of future performance shall mean that any proposed assignee must satisfy the conditions set forth in Section 14.04 above.
Source: Item 23 — RECEIPTS (FDD pages 92–536)
What This Means (2025 FDD)
According to Bonchon's 2025 Franchise Disclosure Document, 'adequate assurance of future performance' in the context of a proposed assignee of a franchise agreement, particularly in bankruptcy cases, means providing Bonchon with specific evidence that the assignee can and will comply with all operational and other performance requirements. This includes adherence to the current Franchise Agreement, the standard form Franchise Agreement then being offered, any ancillary agreements, and Bonchon's policies regarding franchisee duties and obligations. The proposed assignee must also satisfy the conditions outlined in Section 14.04 of the Franchise Agreement.
Specifically, if a third party makes a bona fide offer to accept an assignment of the Franchise Agreement as contemplated by the U.S. Bankruptcy Code, the franchisee must notify Bonchon within five days of receiving the offer, but no later than ten days before applying to a court for approval of the assignment. This notice must include the assignee's name and address, all terms and conditions of the proposed assignment, and 'adequate assurance' of the assignee's future performance. This assurance must align with Section 365 of the U.S. Bankruptcy Code and satisfy the preconditions for assignment set forth in Section 14.04 of the Agreement.
Bonchon retains the right to accept the assignment themselves, or assign it to an affiliate or another franchisee, on the same terms as the bona fide offer, less any saved brokerage commissions or expenses. Bonchon is not liable for any brokerage commissions or expenses unless agreed to in writing. This ensures Bonchon maintains control over who operates a franchise, even in bankruptcy situations, and that the assignee meets all necessary operational and financial standards. The conditions of Section 14.04 include requirements related to the assignee's organizational, managerial, and financial structure, compliance with ownership requirements, completion of training programs, consent from the lessor, curing existing defaults, and executing a new Bonchon Franchise Agreement.