If the Area Development Agreement is terminated due to failure to fulfill development obligations, what happens to any existing Bonchon Franchise Agreements already in operation?
Bonchon Franchise · 2025 FDDAnswer from 2025 FDD Document
Termination of this Agreement for this reason will not be a termination (constructive or otherwise) of any Franchise Agreement(s) entered into by you and us under which you have already commenced the operation of the Bonchon Businesses covered by the Franchise Agreement(s) if you have fully performed and otherwise been in compliance with all of your obligations under the Franchise Agreement(s) in question. You will lose both the right to develop the undeveloped Bonchon Businesses in the Development Territory and the Area Development Fee attributable to the undeveloped Bonchon Businesses, and we may operate or franchise Bonchon Businesses anywhere within the Development Territory without in any way being in violation of this Agreement. This remedy of ours will be in addition to whatever other remedies we may have at law or in equity.
Source: Item 23 — RECEIPTS (FDD pages 92–536)
What This Means (2025 FDD)
According to Bonchon's 2025 Franchise Disclosure Document, the termination of the Area Development Agreement due to a failure to meet development obligations does not automatically terminate existing Franchise Agreements, provided the franchisee has met their obligations under those agreements. This means that if a Bonchon franchisee has already opened and is operating Bonchon restaurants under individual Franchise Agreements, those restaurants can continue to operate even if the Area Development Agreement is terminated.
However, the franchisee will lose the right to develop any further Bonchon restaurants within the designated Development Territory. Additionally, the Area Development Fee associated with the undeveloped Bonchon restaurants will also be forfeited. Bonchon retains the right to operate or franchise Bonchon restaurants within the Development Territory without violating the terminated Area Development Agreement.
This provision protects the franchisee's existing investments in operating restaurants, while also allowing Bonchon to pursue further development in the territory if the franchisee fails to meet the agreed-upon development schedule. It is important for prospective franchisees to understand the development schedule and ensure they can meet the obligations to avoid termination of the Area Development Agreement and loss of future development rights.