Did Bonchon's lease agreements contain any material residual value guarantees?
Bonchon Franchise · 2025 FDDAnswer from 2025 FDD Document
If you will be leasing the Restaurant Location(s) of your Bonchon Restaurant(s), then promptly following our written approval of each proposed Restaurant Location, you must utilize a real estate broker we approve and obtain a lease or sublease for the Restaurant Location which, unless we otherwise approve the lease in advance, must be accompanied by a rider substantially in the form of Exhibit E of this Agreement. You agree to deliver to us a copy of any proposed lease or sublease for the Restaurant Location and any related documents (collectively, the "Lease") before you execute the Lease. Any Lease will be subject to our advance written approval, which we will not
unreasonably withhold or delay, provided, however, that we expressly reserve the right to disapprove any Lease not accompanied by a rider embracing all of the provisions of Exhibit C. If we do not communicate our approval or disapproval of a proposed Lease to you within twenty business days following our receipt of the proposed Lease, then the Lease will be considered and deemed to be disapproved.
Source: Item 23 — RECEIPTS (FDD pages 92–536)
What This Means (2025 FDD)
Based on the 2025 Bonchon Franchise Disclosure Document, the franchise agreement outlines several stipulations regarding lease agreements but does not explicitly mention material residual value guarantees. Specifically, Bonchon requires franchisees to use their best efforts to find an acceptable restaurant location that meets Bonchon's specifications. Bonchon must provide advance written approval for each location, and franchisees may be required to submit various documents for evaluation. If Bonchon visits a proposed location, the franchisee may incur costs for subsequent visits.
According to the FDD, if a franchisee leases their Bonchon restaurant location, they must use a real estate broker approved by Bonchon and obtain a lease or sublease accompanied by a rider substantially in the form of Exhibit E of the agreement, unless Bonchon approves the lease in advance. Franchisees must provide Bonchon with a copy of the proposed lease and related documents before execution, and the lease is subject to Bonchon's advance written approval, which will not be unreasonably withheld or delayed, provided the lease includes all provisions of Exhibit C. If Bonchon fails to communicate approval or disapproval within twenty business days, the lease is deemed disapproved.
Furthermore, the FDD states that franchisees may not create obligations or grant rights against Bonchon or its affiliates in any lease agreement. They must also perform all terms, conditions, covenants, and obligations under the lease and cannot assign, transfer, encumber, or sublet the location without Bonchon's advance written approval. Franchisees must provide Bonchon with a copy of each executed lease, including all exhibits, attachments, and addenda, before the execution due date. Failure to comply with these requirements constitutes a material breach of the agreement, potentially leading to termination.
While the FDD details various lease-related obligations and approval processes, it does not specify whether Bonchon's lease agreements contain material residual value guarantees. A prospective franchisee should seek clarification from Bonchon regarding this aspect to fully understand the financial implications of leasing a restaurant location.