If Bonchon terminates the Development Agreement due to a breach of development obligations, what rights does the developer retain regarding Franchise Agreements executed before the termination date?
Bonchon Franchise · 2025 FDDAnswer from 2025 FDD Document
The termination of this Agreement upon breach of your development obligations, as set forth in Section 6.01 above, will not terminate any of the Franchise Agreements executed by you before the effective date of termination of this Agreement and for which you have already commenced the Bonchon Business(es) covered by the Franchise Agreement(s), but after the effective date of the termination, you will have no right to develop or operate any additional Bonchon Business without first obtaining our express written consent, which we may withhold without cause.
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 Development Agreement due to a breach of development obligations does not automatically terminate any Franchise Agreements that were executed before the termination date, provided that the franchisee has already commenced operations of the Bonchon businesses covered by those agreements. This means that if a developer has opened a Bonchon restaurant under a Franchise Agreement before the Development Agreement is terminated, that restaurant can continue to operate.
However, the developer loses the right to develop or operate any additional Bonchon businesses without Bonchon's express written consent, which Bonchon may withhold without cause. This implies that the developer can no longer expand their Bonchon business beyond the locations already in operation at the time of termination, unless they receive specific approval from Bonchon.
This provision protects the franchisee's existing investments in operating restaurants while also allowing Bonchon to control future development in the territory. It's a fairly standard clause in area development agreements, balancing the interests of both parties. A prospective franchisee should carefully consider the development schedule and ensure they can meet the obligations to avoid potential termination and loss of development rights.