What is the geographic scope of the non-competition covenant after the Bonchon franchise is terminated or expires?
Bonchon Franchise · 2025 FDDAnswer from 2025 FDD Document
| Provisions | Section in Area Development Agreement | Summary |
|---|---|---|
| l. Our approval of transfer by you | Section 12.02, 12.03 and 12.04 | No transfer without our consent except as provided in Area Development Agreement (for example, transfer to a business entity you form for convenience). (Subject to state law.) |
| m. Conditions for our | Sections 12.03 | See l., above. |
| approval of transfer | and 12.04 | |
| n. Our right of first | None | Not applicable. |
| refusal to purchase | ||
| your business | ||
| o. Our option to | None | Not applicable |
| purchase your business | ||
| p. Your death or disa- bility | Section 12.04 | On your death or disability (if you are an individual), or the death or disability of your last surviving owner (if you are a business entity), that person’s rights pass to his or her "Estate". The Estate may continue operating the Business if it provides an acceptable Area Business Manager. This Area Business Manager must assume full time operation of the franchise within 90 days of death or disability. (Subject to state law.) |
| q. Non-competition | Section 11.01 | No involvement in competing business anywhere. (Subject to state law.) |
| covenants during the | ||
| term of the franchise | ||
| r. Non-competition covenants after the franchise is terminated or expires | Section 11.01 | No involvement in competing business for 2 years within your Development Territory, within a 20 mile radius of the perimeter of your Development Territory or within a 20 mile radius of the perimeter of (or within) any Bonchon Business (whether company-owned, franchised or otherwise established and operated). (Subject to state law.) |
Source: Item 17 — RENEWAL, TERMINATION, TRANSFER AND DISPUTE RESOLUTION THE FRANCHISE RELATIONSHIP (FDD pages 71–81)
What This Means (2025 FDD)
According to Bonchon's 2025 Franchise Disclosure Document, if the Area Development Agreement is terminated or expires, the franchisee is restricted from involvement in any competing business for two years. This restriction applies within the franchisee's Development Territory, within a 20-mile radius of the perimeter of their Development Territory, and within a 20-mile radius of the perimeter of (or within) any Bonchon Business, whether company-owned, franchised, or otherwise established and operated. This post-term non-compete is subject to state law, which may impact its enforceability.
This means that after leaving the Bonchon system, a former franchisee cannot operate or be involved with a competing restaurant within these defined geographic areas for the specified two-year period. The restrictions are tied to the franchisee's original Development Territory and all existing Bonchon locations. The franchisee should carefully consider the scope of their Development Territory and the proximity of other Bonchon restaurants when evaluating this restriction.
The geographic scope of the non-compete is relatively standard in franchising, but the specific distances and inclusion of the entire Development Territory are important to note. Franchisees should be aware that this restriction could significantly limit their business opportunities after the franchise agreement ends. It is crucial to understand the boundaries of the Development Territory and the locations of other Bonchon restaurants to fully grasp the potential impact of this non-compete clause.
Prospective franchisees should consult with legal counsel to understand the enforceability of the non-compete agreement in their specific state, as state laws vary regarding the reasonableness and enforceability of such covenants. They should also consider negotiating the terms of the non-compete, if possible, to ensure it is not overly restrictive and allows for reasonable business opportunities after the franchise relationship concludes.