How is the liquidated damages amount calculated if Bonchon terminates the Franchise Agreement due to my default?
Bonchon Franchise · 2025 FDDAnswer from 2025 FDD Document
If we terminate this Agreement because of your default or you terminate same through failure to make payment following notice and opportunity to cure (pursuant to Section 17.05 above), you and we hereby agree that the amount of damages which we would incur for premature termination of this Agreement would be difficult, if not impossible, to accurately ascertain and you will pay an amount equal to the average Continuing Royalties owed to us during the 12 months of operation preceding the effective date of the termination multiplied by the lesser of (a) 24 (being the number of months in two full years) or (b) the number of months remaining in the term of the Franchise Agreement (had it not been terminated) (the "Liquidated Damages"). The Liquidated Damages shall not be construed to be a penalty or in lieu of any other payment and shall be paid by you to us within thirty (30) days following such termination. The parties agree that the formula to calculate the Liquidated Damages is a reasonable estimation of the damages that we would incur because of the premature termination of this Agreement. The parties further acknowledge and agree that your payment of such Liquidated Damages is intended to fully compensate us only for damages resulting from the premature termination of this Agreement, and shall not constitute an election of remedies, a waiver of your default under this Agreement, waiver of any termination of this Agreement by you, nor waiver of our claim for other damages and/or equitable relief resulting from the material breach of this Agreement.
The imposition of these Liquidated Damages shall be at our option. We are not required to impose these Liquidated Damages and may, in addition or in lieu thereof, pursue other remedies available to us at law or in equity resulting from your default under this Agreement, including, without limitation, actual damages we incur, if such can be ascertained, and injunctive relief. All such remedies shall be cumulative and non-exclusive. Payment to us of any amount provided for in this Section 17.10 shall not constitute an election of remedies by us or an excuse for performance of your obligations hereunder.
Source: Item 23 — RECEIPTS (FDD pages 92–536)
What This Means (2025 FDD)
According to Bonchon's 2025 Franchise Disclosure Document, if Bonchon terminates the Franchise Agreement due to your default, the liquidated damages are calculated based on a specific formula. Bonchon and the franchisee agree that determining the exact amount of damages resulting from early termination would be difficult. Therefore, the franchisee will pay an amount equal to the average Continuing Royalties owed to Bonchon during the 12 months of operation before the termination date. This average is then multiplied by the lesser of either 24 (representing two full years) or the number of months remaining in the Franchise Agreement term had it not been terminated. This calculated amount is referred to as the "Liquidated Damages".
The Liquidated Damages are not considered a penalty but rather a reasonable estimate of the damages Bonchon would incur due to the premature termination. The franchisee must pay these damages within 30 days following the termination. However, the payment of Liquidated Damages does not excuse the franchisee's default, waive any termination of the agreement, or prevent Bonchon from claiming other damages or seeking equitable relief resulting from the breach.
It's important to note that imposing Liquidated Damages is at Bonchon's discretion. Bonchon is not obligated to impose these damages and may instead pursue other remedies available under law or equity, including actual damages if they can be determined, and injunctive relief. All remedies available to Bonchon are cumulative and non-exclusive, meaning they can be pursued simultaneously. Therefore, prospective franchisees should understand that the financial implications of defaulting on the Franchise Agreement could extend beyond the Liquidated Damages calculation.