For how long after the expiration or termination of the Bonchon Franchise Agreement are franchisees prohibited from engaging in a Competitive Business within the specified geographical area?
Bonchon Franchise · 2025 FDDAnswer from 2025 FDD Document
For two years immediately following (a) the expiration or termination or assignment of this Agreement for any reason or (b) the date on which all persons restricted by this Section 11.01 begin to comply with this Section 11.01, you are prohibited from directly or indirectly engaging in any Competitive Business as a proprietor, partner, investor, shareholder, director, member, officer, manager, employee, principal, agent, adviser, or consultant, if the other business is located within your Development Territory, within twenty miles of the perimeter of your Development Territory, or within twenty miles of the perimeter of (or within) any Bonchon Business (whether company-owned, franchised or otherwise established and operated).
It is the intention of these provisions to preclude not only direct competition but also all forms of indirect competition, such as consultation for Competitive Businesses, service as an independent contractor for Competitive Businesses, or the provision of any assistance or transmission of information of any kind which would be of any material assistance to a competitor. Nothing in this Section will prevent you from owning for investment purposes no more than an aggregate of 5% of the capital stock of any Competitive Business you do not control and whose stock is listed on the New York Stock Exchange or the National Association of Securities Dealers Automated Quotation System. It is the intention of these provisions that any person or entity with any legal or beneficial interest in or traceable to or through you be bound by the provisions of this covenant.
You agree, unless specifically prohibited by applicable law, to obtain the execution of our Confidentiality/Non-Competition Agreement (Exhibit C) from the following persons and to cause them to refrain from the competitive activities described above: (a) before employment or any
Source: Item 23 — RECEIPTS (FDD pages 92–536)
What This Means (2025 FDD)
According to Bonchon's 2025 Franchise Disclosure Document, franchisees are restricted from engaging in any Competitive Business for a period of two years. This restriction begins immediately following either the expiration, termination, or assignment of the Franchise Agreement for any reason, or from the date when all individuals bound by the non-compete agreement begin to comply with its terms, whichever is later.
This non-compete clause prevents franchisees from being a proprietor, partner, investor, shareholder, member, director, manager, officer, employee, principal, agent, advisor, or consultant in a Competitive Business. The restricted area includes the franchisee's Development Territory, within twenty miles of the perimeter of their Development Territory, or within twenty miles of any Bonchon Business, whether company-owned or franchised. This broad definition aims to prevent both direct and indirect competition, including consulting or providing assistance to competing businesses.
It is important to note that franchisees are not entirely restricted from investment activities. They are allowed to own up to 5% of the capital stock of a Competitive Business, provided they do not control the business, and its stock is listed on a national stock exchange or NASDAQ. This exception allows for minor investment opportunities without violating the non-compete agreement. Franchisees should carefully review the definition of "Competitive Business" in the Franchise Agreement to fully understand the scope of these restrictions.
Bonchon also requires franchisees to ensure that certain individuals, such as Operating Principals, equity holders, control persons, officers, directors, and managers, sign a Confidentiality/Non-Competition Agreement. These agreements must be provided to Bonchon within 10 days of execution, ensuring that key personnel are also bound by similar non-compete obligations. This requirement highlights Bonchon's emphasis on protecting its business interests and confidential information.