If a Bonchon Participating Franchisee terminates the agreement, what formula is used to calculate the liquidated damages owed to Pepsi-Cola for lost business opportunity?
Bonchon Franchise · 2025 FDDAnswer from 2025 FDD Document
petitive beverages not specifically permitted by this Agreement is a material breach of this Agreement.
7.2. Remedies
If this Agreement is terminated before its expiration date other than due to a default by Pepsi-Cola which is not timely cured pursuant to Section 78.1 above, then Participating Franchisee will immediately, to be received by Pepsi-Cola and Bottlers no later than thirty (30) days following termination:
(i) Make a payment to Pepsi-Cola reflecting reimbursement for all funding previously advanced by Pepsi-Cola or the Bottlers but not earned by the Participating Franchisee pursuant to the terms of this Agreement plus
- compounded interest on such unearned funding at the rate of 11% per year based on the time between payment of the advanced funding through the date of termination; and
- (ii) Make a payment to Pepsi-Cola reflecting reimbursement to Pepsi-Cola for (a) the current unamortized book value of Equipment (as reasonably determined by Pepsi-Cola, applying generally accepted accounting principles using 10 year straight line depreciation methodology) which Equipment will be surrendered by Participating Franchisee to Pepsi-Cola, plus (b) an amount representing the costs of removal and refurbishment of such Equipment; and
- (iii)Make a payment to Pepsi-Cola as liquidated damages, and not as a penalty, intended to compensate Pepsi-Cola for los
Source: Item 23 — RECEIPTS (FDD pages 92–536)
What This Means (2025 FDD)
According to Bonchon's 2025 Franchise Disclosure Document, if a Participating Franchisee terminates the agreement with Pepsi-Cola before its expiration date due to reasons other than Pepsi-Cola's uncured default, the franchisee must compensate Pepsi-Cola for lost business opportunities. This compensation is calculated as liquidated damages and is not considered a penalty.
The liquidated damages are determined by two main components. First, $7 is multiplied by the projected number of gallons the Participating Franchisee would have been expected to purchase during the remainder of the agreement term, based on the franchisee's average annualized purchase rate. Second, $10 is multiplied by the projected number of cases the Participating Franchisee would have been expected to purchase during the remainder of the term, again based on the franchisee's average annualized purchase rate. The sum of these two products represents the total liquidated damages owed to Pepsi-Cola for the lost business opportunity.
In addition to the liquidated damages, the Bonchon franchisee is also responsible for other payments to Pepsi-Cola and its Bottlers. These include reimbursement for any unearned funding previously advanced by Pepsi-Cola or the Bottlers, with compounded interest at a rate of 11% per year. The franchisee must also reimburse Pepsi-Cola for the unamortized book value of equipment, determined using a 10-year straight-line depreciation method, as well as the costs of removing and refurbishing the equipment. Furthermore, the franchisee must surrender any Packaged Products Equipment to individual Bottlers and reimburse them for the costs of installation, service, refurbishing, and removal of this equipment.