In the event that Bonchon exercises its option to accept assignment of the franchise agreement during a Bonchon franchisee's bankruptcy, is Bonchon liable for brokerage commissions or other expenses related to the assignment?
Bonchon Franchise · 2025 FDDAnswer from 2025 FDD Document
by, or assigned to, a third party individual or entity which has made a bona fide offer to accept an assignment of this Agreement as contemplated by the U.S. Bankruptcy Code, then you must notify us of any such proposed assignment or assumption within five days after your receipt of such proposed assignee's offer to accept assignment or to assume your rights and obligations under this Agreement. Such notice must be given to us, in any event, no later than ten days prior to the date application is made to a court of competent jurisdiction for authority and approval to enter into such assignment and assumption.
The notice required above must contain the following: (i) the name and address of the proposed assignee; (ii) all of the terms and conditions of the proposed assignment and assumption; and, (iii) adequate assurance to be provided to us to assure the proposed assignee's future performance (as defined below) under this Agreement, including (without limitation) the assurance referred to in Section 365 of the U.S. Bankruptcy Code and the satisfaction of the preconditions to assignment set forth in Section 14.04 of this Agreement.
We will then have the prior right and option, to be exercised by notice given at any time prior to the effective date of the proposed assignment and assumption, to accept an assignment of this Agreement to ourselves, our affiliate or another franchisee, upon the same terms and conditions, and for the same consideration (if any), as in the bona fide offer made by the proposed assignee, less any brokerage commissions or other expenses which may be saved by you as a result of our exercise of the rights and options granted to us herein. Under no circumstance shall we be liable for the payment of any brokerage commissions or other expenses as a result of our exercise of our rights and options hereunder unless we otherwise agree in writing.
Source: Item 23 — RECEIPTS (FDD pages 92–536)
What This Means (2025 FDD)
According to Bonchon's 2025 Franchise Disclosure Document, if a franchisee is facing bankruptcy and a third party makes a bona fide offer to take over the franchise agreement, the franchisee must inform Bonchon of the offer within five days of receiving it, and no later than ten days before applying to a court for approval of the assignment. This notice must include the name and address of the proposed assignee, the terms of the assignment, and assurance of the assignee's future performance.
Bonchon then has the option to accept the assignment themselves, or assign it to an affiliate or another franchisee, on the same terms as the third-party offer. However, Bonchon's consideration would be reduced by any brokerage commissions or other expenses the franchisee saves as a result of Bonchon exercising its option.
The FDD explicitly states that Bonchon will not be liable for any brokerage commissions or other expenses if it exercises its right to accept the assignment, unless Bonchon agrees otherwise in writing. This protects Bonchon from incurring additional costs when taking over a franchise agreement during bankruptcy proceedings.