How does the Bonchon franchisor's requirement for franchisees to purchase proprietary sauces, seasonings, and spice blends (Item 8) affect the franchisee's ability to compete with other restaurants?
Bonchon Franchise · 2025 FDDAnswer from 2025 FDD Document
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Required Purchases and Approved Suppliers
You must offer for sale in your Business all menu items and services we specify, and only those menu items and services we specify. You must purchase proprietary and other designated products (currently Bonchon logoed packaging items, logo-imprinted paper goods, cooking utensils, sweet sugar, brushes, and our proprietary sauces, seasonings and spice blends) from the source that we designate. Currently, our designated supplier, Sysco Foodservice, is the only approved supplier of our (i) proprietary sauce (including any "limited time only sauce" that we may promote from time to time) and (ii) Bonchon logoed packaging items, but we may change the designated supplier(s) of our proprietary sauce and logoed packaging items from time to time in our Confidential Operations Manual. Bonchon LLC is currently the only approved supplier of the other designated products you are required to purchase. You must purchase all other menu items, ingredients, condiments, inventory, signs, furnishings, supplies (including, cleaning supplies), fixtures and equipment from our designated or approved suppliers. You must also exclusively purchase your dishwasher (if operating a Dine-In Restaurant) from our designated supplier, Ecolab Inc. ("Ecolab"). You must purchase Ecolab cleaning and sanitation chemicals directly from Ecolab or one of our designated regional suppliers. We reserve the right to be (and earn a profit as) an approved source or the only approved source of certain of your Restaurant's furniture, fixtures, equipment and/or other trade dress elements. There are no other products for which we or Bonchon LLC is currently an approved supplier. See Item 6.
You must use the AOR that we designate to prepare the plans for the development and construction of your Restaurant. If you would like us to consider an alternative architect, then you must submit to us: (i) (for our approval) the name of your proposed architect and any other information that we may require to assess whether your proposed architect meets our then-current standards and specifications; and (ii) an Architect Evaluation Fee in the amount of $2,500. The Architect Evaluation Fee is payable at the time you submit your request to use an alternate architect and is nonrefundable. Bonchon will review and communicate its decision as to whether your request is approved or rejected within three (3) weeks of the date that you submit all the information that we need to evaluate your proposed architect. If we do not respond to your request in the allotted timeframe, then you are prohibited from using the proposed architect.
You must also retain the services of the AGC we designate to oversee the construction of your Restaurant.
What This Means (2025 FDD)
According to Bonchon's 2025 Franchise Disclosure Document, franchisees are required to purchase proprietary sauces, seasonings, and spice blends from designated sources. Specifically, Sysco Foodservice is currently the only approved supplier of Bonchon's proprietary sauce, including any limited-time-only sauces. Bonchon LLC is the only approved supplier of other designated products. This requirement ensures uniformity in the taste and quality of Bonchon's signature Korean-style fried chicken, which is a key element of the brand's identity.
This restriction on sourcing ingredients impacts a franchisee's ability to compete with other restaurants in several ways. On one hand, it limits the franchisee's flexibility to negotiate prices with different suppliers or to source ingredients locally, potentially leading to higher costs. The FDD estimates that required purchases account for 24.0% to 34.0% of operating expenses. Franchisees must also participate in special promotional programs, including limited-time proprietary sauce promotions, and maintain sufficient inventory to meet customer demand, which may require purchasing a minimum of one case of the promotional sauce.
On the other hand, the mandated use of Bonchon's proprietary sauces and spice blends helps maintain brand consistency and quality control, which can be a competitive advantage. Customers patronize Bonchon because they expect a specific flavor profile, and using the same ingredients across all locations helps meet those expectations. While franchisees may not be able to customize their menu offerings or adjust ingredient costs, they benefit from the established brand recognition and customer loyalty associated with Bonchon's unique taste. The FDD also mentions that Bonchon may negotiate purchase arrangements with suppliers for poultry and other commodities, potentially offering franchisees some cost benefits through bulk purchasing power.
Ultimately, the impact on a franchisee's competitiveness depends on balancing the benefits of brand consistency and quality control against the limitations on sourcing flexibility and potential cost disadvantages. A prospective franchisee should carefully consider these factors and evaluate how they align with their business goals and market conditions.