If I am in default of the Franchise Agreement, what will the Continuing Royalty rate be for my Bonchon business?
Bonchon Franchise · 2025 FDDAnswer from 2025 FDD Document
From the opening date of your Bonchon Business and Restaurant and continuing through the end of the Initial Term of the Franchise Agreement, the weekly Continuing Royalty will equal 5.0% of your previous week's Gross Revenues.
If you are operating your Bonchon Business while you are in default of any provision of the Franchise Agreement other than those defaults listed in Sections 17.01 or 17.02, the weekly Continuing Royalty rates above will be tripled (and will therefore be 15.0%) for each and every one of your operating Bonchon Businesses and Restaurants during a period beginning on the date you receive from us a written notice of default and ending on the date the default is fully cured.
Source: Item 6 — OTHER FEES (FDD pages 13–24)
What This Means (2025 FDD)
According to Bonchon's 2025 Franchise Disclosure Document, the standard weekly Continuing Royalty fee is 5.0% of the previous week's Gross Revenues. However, if a Bonchon franchisee is in default of any provision of the Franchise Agreement (excluding defaults listed in Sections 17.01 or 17.02), the weekly Continuing Royalty rate will be tripled. This increased rate applies to each of the franchisee's operating Bonchon businesses and restaurants.
Specifically, the tripled Continuing Royalty rate will be 15.0%. This higher rate is effective from the date the franchisee receives written notice of the default from Bonchon and continues until the default is fully corrected or "cured".
This provision serves as a significant financial disincentive for franchisees to violate the terms of the Franchise Agreement. Franchisees should ensure they understand and comply with all contractual obligations to avoid triggering this substantial increase in royalty payments. Paying close attention to the conditions outlined in Sections 17.01 and 17.02 of the Franchise Agreement is also crucial, as defaults under those sections may have different consequences.