If Pepsi-Cola determines that a Bonchon Participating Franchisee's foodservice distributor poses an unacceptable credit risk, what options does Pepsi-Cola have?
Bonchon Franchise · 2025 FDDAnswer from 2025 FDD Document
Throughout the Term of the Agreement, Pepsi-Cola acknowledges that Participating Franchisee may elect to receive delivery of the Postmix Products through a foodservice distributor designated by Participating Franchisee. If Participating Franchisee so elects, and should Pepsi-Cola determine that Participating Franchisee's foodservice distributor poses an unacceptable credit risk to Pepsi-Cola, then Pepsi-Cola will have the right, but not the obligation, either to refuse to do business with Participating Franchisee's foodservice distributor, or to impose such additional terms deemed necessary, i.e., C.O.D., refrain from further shipments until outstanding invoices are paid, etc., to minimize risk to Pepsi-Cola. At all times, Pepsi-Cola reserves the right both to establish and subsequently modify terms of sale to any foodservice distributors. If during the Term of the Agreement, Pepsi-Cola apprises Participating Franchisee that its current foodservice distributor poses an unacceptable credit risk, then to the extent that Participating Franchisee continues to desire delivery via a foodservice distributor, Participating Franchisee will use its best efforts to find an alternate foodservice distributor having creditworthiness acceptable to Pepsi-Cola. At all times, Participating Franchisee will support Pepsi-Cola's efforts to collect unpaid amounts due from Participating Franchisee's foodservice distributor. Participating Franchisee acknowledges that Pepsi-Cola at all times reserves the right to immediately to refuse to do business with Participating Franchisee's foodservice distributor in the event of a failure of such foodservice distributor to comply with Pepsi-Cola's policies and procedures.
Source: Item 23 — RECEIPTS (FDD pages 92–536)
What This Means (2025 FDD)
According to Bonchon's 2025 Franchise Disclosure Document, if a Bonchon franchisee elects to receive delivery of Pepsi-Cola products through a foodservice distributor and Pepsi-Cola deems that distributor to be an unacceptable credit risk, Pepsi-Cola has specific rights. Pepsi-Cola can either refuse to do business with the franchisee's chosen distributor or impose additional terms to minimize their risk. These terms could include requiring cash on delivery (C.O.D.) or halting further shipments until outstanding invoices are settled. Pepsi-Cola retains the right to set and change the terms of sale for any foodservice distributors.
If Pepsi-Cola informs a Bonchon franchisee that their current distributor is a credit risk and the franchisee wants to continue using a distributor, the franchisee must try to find an alternative distributor acceptable to Pepsi-Cola. The franchisee is obligated to support Pepsi-Cola's efforts to collect any unpaid amounts from their foodservice distributor.
Bonchon franchisees should be aware that Pepsi-Cola can immediately refuse to do business with a franchisee's foodservice distributor if that distributor fails to comply with Pepsi-Cola's policies and procedures. This clause highlights the importance of the financial stability and compliance of any foodservice distributor chosen by a Bonchon franchisee to supply Pepsi products.