How does Bonchon handle up-front fees paid by franchisees for development rights (ADAs)?
Bonchon Franchise · 2025 FDDAnswer from 2025 FDD Document
eement will be for a period beginning on the date we sign this Agreement and extending until the earlier of the actual date the last Franchise Agreement is executed pursuant to this Agreement or the Due Date of Execution of Lease for the last restaurant to be developed pursuant to and specified in Section 6.01 of this Agreement, unless sooner terminated in accordance with the provisions of this Agreement.
4.02 Notice of Expiration
If applicable law requires us to give notice of expiration to you at a specified time before the expiration of the Term of this Agreement, and we have not done so, then the term of this Agreement will be extended on a month-to-month basis until we have given you the required notice of expiration and the required period before the expiration of the Agreement becomes effective has expired.
5. AREA DEVELOPMENT FEE
5.01 Area Development Fee
In consideration of our execution of this Agreement, you agree to pay us an area development fee equal to: (i) the Initial Franchise Fee for the first Bonchon Business that you will develop, plus (ii) a $10,000 deposit for each subsequent Bonchon Businesses (the "Area Development Deposit") which you are required to develop, own and operate pursuant to Section 6.01 of this Agreement (the "Area Development Fee"). The Area Development Fee is payable in full when you sign this Agreement and will be fully earned when paid. You recognize that we have incurred administrative and other expenses in relation to this Agreement, and that our development opportunities have been lost or curtailed as a result of the territorial rights granted to you in this Agreement. Therefore, we will not refund the Area Development Fee in whole or in part, under any circumstance.
Your Initial Franchise Fee (as defined in the Franchise Agreement) for each Bonchon Business you open pursuant to this Agreement will be calculated according to the following schedule:
| Bonchon Business | Initial Franchise Fee |
|---|---|
| Bonchon Businesses 1-5 in Development Schedule | $35,000 |
| Bonchon Businesses 6-10 in Development Schedule | $30,000 |
| Bonchon Businesses 11 and more in Development Schedule | $25,000 |
We will credit the Area Development Deposit attributable to each Bonchon Business – that is, $10,000 per Bonchon Business – against the Initial Franchise Fee for the Bonchon Business.
**6.
Source: Item 23 — RECEIPTS (FDD pages 92–536)
What This Means (2025 FDD)
According to Bonchon's 2025 Franchise Disclosure Document, Area Development Fees (ADF) are required when a franchisee is granted the rights to develop multiple Bonchon restaurants. The ADF is the sum of the initial franchise fee for the first Bonchon restaurant plus a $10,000 deposit for each subsequent restaurant the franchisee is obligated to develop, own, and operate under the Area Development Agreement.
The Area Development Fee is due in full upon signing the Area Development Agreement and is considered fully earned by Bonchon upon payment. The document explicitly states that the ADF is non-refundable, in whole or in part, under any circumstances. This reflects Bonchon's position that it incurs administrative and other expenses and loses development opportunities by granting territorial rights to the franchisee.
Bonchon credits the $10,000 deposit for each restaurant against the Initial Franchise Fee when each respective Bonchon restaurant opens. If the franchisee fails to meet the development schedule outlined in the agreement, it will be considered a material breach of the agreement, potentially leading to termination. In such cases, the franchisee loses the right to develop any remaining restaurants in the territory and forfeits the portion of the Area Development Fee associated with those undeveloped locations. Bonchon then has the right to operate or franchise restaurants within the development territory without violating the agreement.