What happens if a Bonchon franchisee fails to meet the conditions outlined in Section 4 of the Rider?
Bonchon Franchise · 2025 FDDAnswer from 2025 FDD Document
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- Continuing Royalty. The first paragraph of Section 5.02 of each franchise agreement signed pursuant to the Area Development Agreement and where the subject Restaurant opens and commences operations in accordance with the conditions set forth herein below will be amended to read as follows:
From the opening date of your Bonchon Restaurant and continuing through the end of your Bonchon Restaurant's first full twelve months of operations, you agree (subject to the terms and conditions of the Area Development Agreement Rider – 2025 Development Incentive Program which you have executed in connection with this Agreement) to pay us a weekly Continuing Royalty equal to 2.5% of your previous week's Gross Revenues, as defined in Section 5.05 ("Definition of Gross Revenue"). After your Restaurant's first full twelve months of operations and continuing through the remainder of the Initial Term of the Franchise Agreement, you agree to pay us a weekly Continuing Royalty equal to 5.0% of your previous week's Gross Revenues. The Continuing Royalty is solely in consideration of our granting you the franchise conferred by this Agreement and is not in exchange for any particular goods, services or assistance we may furnish you.
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- Conditions. Area Developer acknowledges, understands and expressly agrees that for Area Developer (or its approved franchisee affiliate, as applicable) to receive the incentives described in Section 2 and 3 of this Rider for a Restaurant development under the Area Development Agreement, each of the following conditions must be satisfied:
- a. The subject Restaurant opens to the general public and commences regular operations no later than its Scheduled Opening Date as reflected in Section 6.01 of the Area Development Agreement;
- b. Area Developer is in full compliance with the Area Development Agreement and all other agreements with Franchisor and its affiliates: and
c. Area Developer (and each of its approved franchisee affiliates) operating franchised Businesses pursuant to the Area Development Agreement or otherwise (each, an "Affiliate Franchisee") is in full compliance with its respective franchise agreements and all other agreements with Franchisor or its affiliates.
Source: Item 23 — RECEIPTS (FDD pages 92–536)
What This Means (2025 FDD)
According to Bonchon's 2025 Franchise Disclosure Document, Section 4 of the Area Development Agreement Rider outlines specific conditions that an Area Developer must meet to receive development incentives. These conditions include opening the restaurant to the public by the scheduled opening date, full compliance with the Area Development Agreement and other agreements with Bonchon, and ensuring that all affiliated franchisees are also in full compliance with their respective franchise agreements and other agreements with Bonchon.
If these conditions are not met, the Area Developer will not receive the development incentives described in Sections 2 and 3 of the Rider for a Restaurant development under the Area Development Agreement. These incentives typically involve a reduced royalty fee during the restaurant's first year of operation. Specifically, instead of the standard 5.0% weekly continuing royalty, the franchisee would pay a reduced rate of 2.5% of the previous week's gross revenues for the first twelve months.
Therefore, it is crucial for prospective Bonchon franchisees and Area Developers to understand and adhere to all terms and conditions outlined in the Area Development Agreement and related documents to ensure they are eligible for any available incentive programs. Failure to comply can result in the loss of these financial benefits, impacting the profitability of the franchise during its initial operating period.