What is my obligation regarding diverting business to competitors of the Bonchon franchisee or franchisor?
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, as a franchisee, you are explicitly prohibited from diverting business away from your Bonchon franchise to any competing entity. This obligation extends both during the term of your franchise agreement and for a period after the agreement's termination.
The franchise agreement states that you cannot directly or indirectly engage in any business that offers or sells Korean fried chicken or serves chicken as a primary menu item, defined as deriving 25% or more of gross revenues from chicken sales. This restriction applies within a 20-mile radius of your Bonchon Restaurant location or any other Bonchon location, whether franchised or company-owned. The non-compete lasts for two years after the termination, expiration, or assignment of your franchise agreement.
This prohibition covers a wide range of activities, including acting as a proprietor, partner, investor, shareholder, member, director, manager, officer, employee, principal, agent, advisor, consultant, lessor, or sublessor for a competing business. The intention is to prevent not only direct competition but also indirect competition, such as consulting for competitors or providing them with information. However, you are allowed to own up to 5% of the capital stock of a publicly held competitor for investment purposes only, provided you do not control the competitor and the stock is traded on a national or regional stock exchange.
These restrictions are typical in franchise agreements to protect the brand and market share of the franchisor and other franchisees. Failing to comply with these non-compete and non-diversion clauses could result in legal action and termination of the franchise agreement.