In Indiana, how does the prohibition against unilateral termination of the Bonchon franchise without good cause affect Article 17 of the Franchise Agreement and Article 15 of the Area Development Agreement?
Bonchon Franchise · 2025 FDDAnswer from 2025 FDD Document
ted in connection with the franchise.
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- This Addendum may be executed in counterparts, which together shall constitute one and the same instrument. Signatures via DocuSign, .PDF file, facsimile, or other electronic format have the same force and effect as originals.
[Signature page follows.]
| 1. In Section | 12.02 | of the Franchise | Agreement (“Covenant | Not to Compete”), | in the third | |---|---|---|---|---|---| [Signature Page – Illinois Addendum to Franchise Agreement]
INDIANA ADDENDUM TO FRANCHISE AGREEMENT
Notwithstanding anything to the contrary set forth in the Franchise Agreement, the following provisions will supersede and apply:
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- The laws of the State of Indiana supersede any provisions of the Franchise Agreement or New York law if such provisions are in conflict with Indiana law. The Franchise Agreement will be governed by Indiana law, rather than New York law, as stated in Section 32.03 of the Franchise Agreement.
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- Venue for litigation will not be limited to New York, as specified in Section 32.04 of the Franchise Agreement.
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Source: Item 23 — RECEIPTS (FDD pages 92–536)
What This Means (2025 FDD)
According to Bonchon's 2025 Franchise Disclosure Document, Indiana law provides specific protections to franchisees regarding the termination of their agreements. Specifically, Indiana Code 23-2-2.7-1(7) prohibits the unilateral termination of a franchise without good cause or in bad faith. The code defines 'good cause' as a material breach of the franchise agreement. For Bonchon franchisees in Indiana, this means that Article 17 of the Franchise Agreement ('Default and Termination') and Article 15 of the Area Development Agreement ('Default and Termination') are superseded by Indiana law to the extent that those articles are inconsistent with the state's prohibition against termination without good cause.
In practical terms, Bonchon cannot simply terminate a franchise agreement in Indiana without demonstrating a legitimate, material breach of the agreement by the franchisee. This protection ensures that franchisees are not subject to arbitrary or unfair termination. It also provides a legal basis for franchisees to challenge a termination they believe is not based on a material breach or was done in bad faith. This Indiana law offers a stronger safeguard for franchisees compared to states where franchisors have more latitude in terminating agreements.
This addendum to the franchise agreement highlights the importance of understanding state-specific laws when investing in a franchise. While the core franchise agreement may be standardized, state laws can significantly alter the rights and obligations of both the franchisor and franchisee. Prospective Bonchon franchisees in Indiana should carefully review the Indiana Addendum and understand how it modifies the standard franchise agreement to comply with Indiana law, particularly regarding termination rights.