In the event of a Bonchon franchisee bankruptcy, does Bonchon have the right to accept an assignment of the franchise agreement before a proposed assignee?
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 legitimate offer to take over the franchise agreement, the franchisee must inform Bonchon within five days of receiving the offer, 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 offer, and assurance of the assignee's ability to perform under the agreement, meeting the requirements of Section 14.04 of the Franchise Agreement and Section 365 of the U.S. Bankruptcy Code.
Bonchon then has the option to accept the assignment themselves, or assign it to an affiliate or another franchisee, before the proposed assignee. This right must be exercised before the effective date of the proposed assignment. The terms would be the same as the third party's offer, but Bonchon would not be responsible for any brokerage commissions or expenses unless agreed to in writing.
This clause allows Bonchon to maintain control over who operates a franchise within their system, even in bankruptcy situations. It ensures that Bonchon can prioritize an assignee that aligns with their brand standards and strategic goals, potentially avoiding disruption or damage to the brand's reputation. For a franchisee, this means that even in financial distress, Bonchon has significant power over the future of the franchise and who might take it over.