If a Bonchon franchisee proposes an assignee, who is responsible for paying the costs of any investigation conducted by Bonchon?
Bonchon Franchise · 2025 FDDAnswer from 2025 FDD Document
You may not sell or otherwise assign or transfer all or any interest in you (if you are a business entity), the franchise conferred by this Agreement, your franchised Business, your Bonchon Restaurant, your right to use the Bonchon System, Proprietary Marks, Confidential Information and/or Manuals, or any interest in any of these, to a third party without our prior written consent. If we do not elect to exercise our right of first refusal (as provided in Section 14.06 below), which right shall not apply in the event that the assignee is a member of your immediate family, then we will not unreasonably withhold consent to the assignment and sale. You agree that it will not be unreasonable for us to impose, among other requirements, the following conditions to granting consent to the proposed assignment and sale:
- A. That the proposed assignee (meaning all individuals and entities which, after the proposed sale, transfer or assignment, will be franchisees under this Agreement or under any successor agreement) applies to us for acceptance as a franchisee, and furnishes to us the information and references that we request to determine the proposed assignee's skills, qualifications, financial condition, background and history, reputation, economic resources, education, managerial and business experience, moral character, credit rating and ability to assume your duties and obligations under this Agreement and any related agreement. You must pay the costs of any such investigation conducted by us.
Source: Item 23 — RECEIPTS (FDD pages 92–536)
What This Means (2025 FDD)
According to Bonchon's 2025 Franchise Disclosure Document, if a franchisee wishes to assign their franchise to a third party, the franchisee is responsible for covering the costs of any investigation that Bonchon conducts on the proposed assignee. This includes the costs associated with assessing the assignee's qualifications, financial condition, background, and ability to fulfill the obligations of the franchise agreement.
This requirement ensures that Bonchon can thoroughly vet potential assignees to maintain brand standards and protect the interests of the franchise system. By placing the financial burden of the investigation on the current franchisee, Bonchon mitigates its own risk and expense in evaluating the proposed transfer. The investigation helps Bonchon determine if the assignee possesses the necessary skills, resources, and character to successfully operate the franchise.
For a prospective Bonchon franchisee, this means that if they decide to sell their franchise in the future, they will need to factor in the cost of Bonchon's investigation into the potential buyer. This cost is in addition to other transfer-related fees, such as the $15,000 transfer fee and the On-Site Inspection Upon Transfer Fee of $250 per inspector per day, plus lodging, transportation, and food costs. Franchisees should be prepared to cover these expenses to facilitate the transfer process.
It is common practice in franchising for the seller to bear the costs associated with the franchisor's investigation of a proposed assignee. This helps ensure that the franchisor can maintain control over who enters the system and that new franchisees meet the required standards. Franchisees should carefully review the transfer provisions in their franchise agreement to understand all the costs and conditions associated with selling their franchise.