For a Bonchon franchise, if the franchisee is a business entity, are all owners executing the agreement liable for the franchisee's obligations and duties?
Bonchon Franchise · 2025 FDDAnswer from 2025 FDD Document
- C. If more than two individuals serve as "Franchisee" hereunder, each individual involved in the new entity must have the same proportionate ownership interest in the new entity as he or she had in the franchised Business before the assignment.
- D. You and the business entity must execute an agreement with us under which you and the business entity agreed to be jointly and severally liable for all duties, responsibilities and obligations to us under this Agreement and expressly agree to be bound by all of the terms, conditions and covenants of this Agreement. Each then-current and future owner of any interest in the business entity must agree in writing to personally guarantee the performance by the business entity of your obligations under this Agreement, and to be individually bound by all of the terms and conditions of this Agreement and any other agreements between you and us, in the form of Exhibit H to this Agreement.
- E. Each present and future owner of any interest in the business entity must execute our Confidentiality/Non-Competition Agreement in the form of Exhibit E to this Agreement.
- F. The name of the business entity formed by you may not include the Proprietary Mark "Bonchon", any variant thereof or any word confusingly similar thereto.
- G. All of your business entity's organizational documents and evidence of ownership interests (such as stock certificates) must state that the issuance and transfer of any interest in the business entity are restricted by the terms of this Agreement and subject to our prior written consent.
- H. Your business entity must comply in all respects with the requirements and prohibitions set forth in Section 8.18 of this Agreement ("Business Entity Requirements and Records").
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 a business entity, there are specific requirements regarding the liability of the owners. Bonchon requires that the business entity and the individual(s) forming the entity execute an agreement making them jointly and severally liable for all obligations to Bonchon under the Franchise Agreement. This means that both the business entity and the individuals are responsible for fulfilling the duties outlined in the agreement.
Furthermore, Bonchon mandates that each current and future owner of any interest in the business entity must agree in writing to personally guarantee the performance of the business entity's obligations. This guarantee must be in the form of Exhibit H to the Franchise Agreement. Additionally, these owners must agree to be individually bound by all terms and conditions of the Franchise Agreement and any other agreements between them and Bonchon. They must also execute Bonchon's Confidentiality/Non-Competition Agreement, as detailed in Exhibit E.
These stipulations ensure that Bonchon has recourse to the personal assets of the owners of the business entity, providing an additional layer of security for Bonchon in the event of non-compliance or breach of contract. This is a common practice in franchising, as it protects the franchisor's interests by holding individuals accountable for the performance of their business entities. The organizational documents of the business must also state that the issuance and transfer of any interest in the entity are restricted by the terms of the Franchise Agreement and subject to Bonchon's prior written consent.