When a Bonchon franchise is terminated, how is the purchase price determined for leasehold improvements, furniture, fixtures, supplies, equipment, and trade dress elements?

According to Bonchon's 2025 Franchise Disclosure Document, if the franchise agreement is terminated, Bonchon has the option to purchase the franchisee's operating assets. Should Bonchon choose to exercise this option, the purchase price for leasehold improvements, furniture, fixtures, supplies, equipment, and trade dress elements will be equal to their depreciated book value. This valuation method is a standard accounting practice, reflecting the asset's original cost minus accumulated depreciation.

This arrangement has significant implications for a franchisee. Depreciated book value may be substantially lower than the fair market value, especially for well-maintained or recently acquired assets. This means a franchisee might receive less than what they perceive the assets to be worth. It is crucial for prospective franchisees to understand how depreciation is calculated and how it might affect the resale value of their assets upon termination.

Furthermore, Bonchon has the discretion to exclude any assets that they deem unnecessary or not meeting system standards, which would further reduce the purchase price. The franchisee should maintain detailed records of all assets, their original costs, and depreciation schedules to ensure transparency and potentially negotiate a fairer price. Understanding these terms is essential for any potential Bonchon franchisee to accurately assess the financial risks and potential returns associated with the franchise.