In the event of an early equipment replacement at a Bonchon franchise, what costs can Pepsi-Cola invoice the participating franchisee for?
Bonchon Franchise · 2025 FDDAnswer from 2025 FDD Document
If at any time during the Term subsequent to initial installation of any unit of Equipment (e.g., as a result of an Outlet remodeling/internal redesign/reconfiguration, etc.), Participating Franchisee requests that Pepsi-Cola replace Equipment prior to full amortization (as reasonably determined by Pepsi-Cola, applying generally accepted accounting principles using 10 year straight line depreciation methodology), then Participating Franchisee will notify Pepsi-Cola of such requests in writing and at least thirty (30) days in advance, and Pepsi-Cola may, in its sole discretion, elect to replace affected Equipment ("Early Replacement"). Upon notice of such Early Replacement(s), Participating Franchisee will cooperate with Pepsi-Cola and its Bottlers to provide access to such Outlet(s) to remove and replace Equipment and will surrender the pre-existing Equipment to be replaced.
In both Equipment Removal and Early Replacement scenarios above, Pepsi-Cola reserves the right to invoice Participating Franchisee immediately for (i) the current unamortized book value of such Equipment (as reasonably determined by Pepsi-Cola, applying generally accepted accounting principles using 10 year
straight line depreciation methodology) excluding the unamortized book value of any fountain dispenser(s), or other unit(s) for which Pepsi-Cola seeks to retain title, which fountain dispenser(s) or unit(s) will be surrendered by Participating Franchisee to Pepsi-Cola, plus (ii) an amount representing the costs of removal and refurbishment of such Equipment and/or Packaged Products Equipment. Participating Franchisee will pay any such invoice in full within thirty (30) days of the date of Pepsi-Cola's invoice.
Source: Item 23 — RECEIPTS (FDD pages 92–536)
What This Means (2025 FDD)
According to Bonchon's 2025 Franchise Disclosure Document, if a franchisee requests an early replacement of equipment from Pepsi-Cola, Pepsi-Cola has the right to invoice the franchisee for specific costs. These costs include the current unamortized book value of the equipment, excluding the unamortized book value of any fountain dispensers or units for which Pepsi-Cola seeks to retain title. The unamortized book value is determined by Pepsi-Cola using generally accepted accounting principles and a 10-year straight-line depreciation methodology.
In addition to the unamortized book value, Pepsi-Cola can also invoice the Bonchon franchisee for the costs associated with the removal and refurbishment of the replaced equipment and/or packaged products equipment. The franchisee is obligated to pay the full amount of the invoice within thirty days from the invoice date.
This means that if a Bonchon franchisee wants to upgrade or replace equipment before its full depreciation, they will be responsible for covering the remaining book value of the old equipment, as well as the expenses Pepsi-Cola incurs to remove and refurbish it. This could potentially be a significant expense, so franchisees should carefully consider the timing of equipment upgrades and replacements.