For how long after the termination, expiration, or assignment of the Bonchon franchise agreement is a franchisee restricted from engaging in a Competitive Business?
Bonchon Franchise · 2025 FDDAnswer from 2025 FDD Document
nd comply with the confidentiality provisions of this Agreement. Your agreement to procure execution of our Confidentiality/Non-Competition Agreement from certain of your owners, and procure execution of our Confidentiality Agreement from your management and staff is set forth below in Section 12.05.
12.02 Covenant Not to Compete
You agree that (i) at any geographic location whatsoever during the Initial Term and any Successor Term of this Agreement, and (ii) within twenty miles of your Restaurant Location or within twenty miles of the Restaurant Location of any other franchised or company-owned Bonchon Business (regardless of how established or operated) for a period two years immediately following the later of (a) the termination, expiration or assignment (as defined in Section 14.02 below) of this Agreement or any Successor Agreement for any reason or (b) the date on which all persons restricted by this Section 12.02 begin to comply with this Section 12.02, you will not directly or indirectly engage in, aid, assist, serve or participate in any other business or activity which offers or sells (or grants franchises or licenses to third parties to operate businesses that offer or sell) Korean fried chicken or that serve chicken as a primary menu item (a "Competitive Business"). For the purposes of this Section, a business that serves chicken as a primary menu item is defined as a business that derives 25% or more of its gross revenues from selling chicken;.
You are prohibited from directly or indirectly engaging in any Competitive Business as a proprietor, partner, investor, shareholder, member, director, manager, officer, employee, principal, agent, advisor, consultant, lessor, sublessor or any similar capacity. In addition, you agree not to divert any business that should be handled by the franchised Business to any other person or entity. 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 any assistance or transmission of information of any kind which would be of any material assistance to a competitor.
Source: Item 23 — RECEIPTS (FDD pages 92–536)
What This Means (2025 FDD)
According to Bonchon's 2025 Franchise Disclosure Document, a franchisee is restricted from engaging in a Competitive Business for two years. This restriction applies immediately following the termination, expiration, or assignment of the Franchise Agreement for any reason. The restriction also begins on the date when all individuals bound by the non-compete agreement start to comply with its terms.
The non-compete clause prevents the franchisee from directly or indirectly participating in a Competitive Business. This includes roles such as a proprietor, partner, investor, shareholder, director, member, officer, manager, employee, principal, agent, advisor, or consultant. The restricted area includes the franchisee's Development Territory, within twenty miles of its perimeter, and within twenty miles of any Bonchon Business, whether company-owned or franchised.
The terms are designed to prevent both direct and indirect competition, such as consulting for competing businesses or providing them with assistance or information. However, a franchisee is allowed to own up to 5% of the capital stock of a Competitive Business for investment purposes, provided they do not control the business and the stock is publicly traded on a major exchange. This non-compete agreement extends to individuals and entities with any legal or beneficial interest connected to the franchisee.
Bonchon requires franchisees to obtain a Confidentiality/Non-Competition Agreement from their Operating Principals before employment or promotion. If the franchisee is a business entity, similar agreements must be secured from equity holders, control persons, shareholders, members, partners, general partners, officers, directors, and managers. Copies of these signed agreements must be provided to Bonchon within 10 days of execution, ensuring comprehensive protection against competition.