If Bonchon terminates the Area Development Agreement due to failure to comply with the Development Schedule, will existing Franchise Agreements be terminated if the Bonchon businesses are open and not in default?
Bonchon Franchise · 2025 FDDAnswer from 2025 FDD Document
section references in the table above are to the Franchise Agreement.
Area Development Agreement
| Provisions | Section in Area Development Agreement | Summary |
|---|---|---|
| a. Length of the franchise Term | 4.01 | Term is from date we sign agreement until the earlier of either the actual date of execution of the last Franchise Agreement scheduled to be signed under the Area Development Agreement or the last Date of Execution of Lease as specified in Section 6.01 of the agreement. |
| b. Renewal or extension of the term | Section 4.02 | The Area Development Agreement is not renewable. |
| c. Requirements for | None | Not Applicable. |
| you to renew or | ||
| extend | ||
| d. Termination by you | Section 15.02 |
|
| e. Termination by us without cause | None. | Not applicable. |
| f. Termination by us with cause | Article 15 | We may terminate only if you default. (Subject to state law.) |
| g. "Cause" defined - | Section 15.03 | Except for defaults described in h. below, you have 15 days to cure any default under the Area Development Agreement. (Subject to state law.) |
| defaults which can be | ||
| cured | ||
| h. "Cause" defined - | Section 15.01 and 15.02 | Automatic, without notice: bankruptcy, insolvency, receivership, dissolution, liquidation or levy. On notice to you: a. You omitted or misrepresented a material fact in information you furnished us in connection with our decision to sign the Area Development Agreement. b. We and you agree in writing to terminate the Area Development Agreement. c. You, your Area Manager any of your District Managers, and/or, if you are a business entity, any owner, member, shareholder, director or manager is convicted of a felony, etc. d. You (if you are a business entity, any owner or principal of you) make an unauthorized transfer. \ne. You do not comply with the covenant not to compete during the term of the Area Development Agreement; violate restrictions pertaining to the use of Confidential Information contained in the Area Development Agreement; or, do not obtain the signing of the additional covenants required by the Area Development Agreement. f. You, your Area Manager and all others required to do so fail to attend or successfully complete our Initial Training Program. g. You knowingly or through gross negligence: conceal revenues; maintain false books or records; falsify information or otherwise defraud or make false representations to us; or, submit any false report to us. h. After curing a default which is subject to cure, you commit the same act of default again within six months. \ni. You make a willful misrepresentation or do not make a material disclosure required by any governmental authority. j. You interfere or attempt to interfere in any manner with our or our affiliates' contractual relations and/or our relationships with other franchisees; |
Source: Item 17 — RENEWAL, TERMINATION, TRANSFER AND DISPUTE RESOLUTION THE FRANCHISE RELATIONSHIP (FDD pages 71–81)
What This Means (2025 FDD)
Based on the 2025 Bonchon Franchise Disclosure Document, the document does not specify whether existing Franchise Agreements will be terminated if the Area Development Agreement is terminated due to failure to comply with the Development Schedule, provided the Bonchon businesses are open and not in default.
Item 17 of the FDD outlines various termination conditions related to the Area Development Agreement, including termination by the franchisee or by Bonchon with or without cause. However, it does not explicitly address the scenario where Bonchon terminates the Area Development Agreement due to a failure to meet the development schedule and the impact on existing, compliant franchise agreements.
Therefore, it is essential for a prospective franchisee to seek clarification from Bonchon regarding the status of existing franchise agreements under these specific circumstances. Understanding the conditions under which existing franchise agreements remain valid, even if the Area Development Agreement is terminated, is crucial for making an informed investment decision.