After the Bonchon franchise agreement expires or terminates, what happens to the restrictions on Bonchon and its affiliates from operating or franchising similar businesses within the Development Territory?
Bonchon Franchise · 2025 FDDAnswer from 2025 FDD Document
For so long as this Agreement is in effect, neither we nor any affiliate (meaning any individual or entity we control, which controls us or which is under common control with us, together our "affiliates") will, within the Development Territory, operate or grant a franchise for a restaurant business operated under the Proprietary Marks of the type franchised to you hereunder, or a similar or competitive business, except as provided in Section 3.03 ("Rights We Reserve"). These restrictions, which are subject to the Trade Area Satisfaction Exception (as defined below), will terminate immediately upon the expiration or termination of this Agreement for any reason. Notwithstanding the foregoing, you acknowledge, understand and expressly agree that if your Development Territory is comprised of various geographic trade areas within a particular or one or more cities, states or regions and we designate a specific number of Businesses that you may develop or operate within each geographic trade area, your exclusive right to develop and operate Bonchon Businesses within a certain geographic trade area will terminate once you have developed the specified number of Bonchon Businesses in the subject geographic trade area. For the avoidance of doubt, if your Development Territory includes City A, City B and City C and we grant you the right to develop two Bonchon Businesses in each city, then your right to develop Bonchon Businesses in City A will cease once you developed and commenced operations of two Bonchon Businesses. Accordingly, we will have the right to develop and operate or grant a third party the right to develop and operate additional Bonchon Businesses in City A, even if you have not fully satisfied your development obligations under Section 6.01 of this Agreement with respect to the other geographic territories within the Development Territory (e.g. in City B and City C) (the "Trade Area Satisfaction Exception"); provided, however that neither we nor any third party will have the right to develop and operate a Bonchon Business within the Protected Territory granted under the Franchise Agreement for each of the Bonchon Restaurants that you developed in City A pursuant to this Agreement except as we are otherwise permitted in Section 3.03 below or under the Franchise Agreement.
Source: Item 23 — RECEIPTS (FDD pages 92–536)
What This Means (2025 FDD)
According to Bonchon's 2025 Franchise Disclosure Document, the restrictions on Bonchon and its affiliates from operating or franchising a restaurant business under the Proprietary Marks, or a similar or competitive business, within the Development Territory terminate immediately upon the expiration or termination of the Area Development Agreement. This is with reference to Section 3.03, which lists the rights Bonchon reserves.
However, the FDD also states that if the Development Territory is comprised of various geographic trade areas within a particular city, state, or region, and Bonchon designates a specific number of Businesses that the franchisee may develop or operate within each geographic trade area, the franchisee's exclusive right to develop and operate Bonchon Businesses within a certain geographic trade area will terminate once the franchisee has developed the specified number of Bonchon Businesses in the subject geographic trade area. For example, if the Development Territory includes City A, City B, and City C, and Bonchon grants the franchisee the right to develop two Bonchon Businesses in each city, then the franchisee's right to develop Bonchon Businesses in City A will cease once the franchisee has developed and commenced operations of two Bonchon Businesses.
Bonchon will then have the right to develop and operate or grant a third party the right to develop and operate additional Bonchon Businesses in City A, even if the franchisee has not fully satisfied its development obligations with respect to the other geographic territories within the Development Territory (e.g. in City B and City C) (the "Trade Area Satisfaction Exception"); provided, however that neither Bonchon nor any third party will have the right to develop and operate a Bonchon Business within the Protected Territory granted under the Franchise Agreement for each of the Bonchon Restaurants that the franchisee developed in City A pursuant to the Area Development Agreement except as otherwise permitted in Section 3.03 or under the Franchise Agreement.