What is one condition related to the Area Developer's compliance that affects the Bonchon franchisee's eligibility for incentives?
Bonchon Franchise · 2025 FDDAnswer from 2025 FDD Document
in consideration of our execution of this Agreement and not in exchange for any particular products, services or assistance.
- Continuing Royalty. The first paragraph of Section 5.02 of the Franchise Agreement ("Continuing Royalty") is hereby amended to read as follows:
From the opening date of your Bonchon Restaurant and continuing through the end of your Bonchon Restaurant's first full twelve months of operations, you agree (subject to the terms and conditions of the Franchise Agreement Rider – 2025 Development Incentive Program which you have executed in connection with this Agreement) to pay us a weekly Continuing Royalty equal to 2.5% of your previous week's Gross Revenues, as defined in Section 5.05 ("Definition of Gross Revenues"). After your Restaurant's first full twelve months of operations and continuing through the remainder of the Initial Term of the Franchise Agreement, you agree to pay us a weekly Continuing Royalty equal to 5.0% of your previous week's Gross Revenues. The Continuing Royalty is solely in consideration of our granting you the franchise conferred by this Agreement and is not in exchange for any particular goods, services or assistance we may furnish you.
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- Conditions. Franchisee acknowledges, understands and expressly agrees that each of the following conditions must be satisfied in order for Franchisee to receive the incentives described in Sections 2 and 3 of this Rider for the subject Restaurant being opened under the Area Development Agreement:
- a. The Restaurant opens to the general public and commences regular operations no later than its Scheduled Opening Date as reflected in Section 6.01 of the Area Development Agreement;
- b. Franchisee has fulfilled all obligations under the New Marketing Plan for its Restaurant as required under Section 10.03 of the Franchise Agreement;
- c. Franchisee is in full compliance with the Franchise Agreement, and all other agreements with Franchisor and its affiliates; and
d. Area Developer (and its approved affiliates operating franchised Businesses under the Area
Source: Item 23 — RECEIPTS (FDD pages 92–536)
What This Means (2025 FDD)
According to Bonchon's 2025 Franchise Disclosure Document, a Bonchon franchisee's eligibility for development incentives is contingent upon the Area Developer's compliance with their agreements. Specifically, if the Area Developer (or any of their approved franchisee affiliates) fails to fully comply with their Area Development Agreement, franchise agreements, or any other agreements with Bonchon or its affiliates, the franchisee will forfeit the incentives.
This condition means that a Bonchon franchisee's ability to benefit from reduced fees or royalty rates is not solely dependent on their own performance. It also hinges on the Area Developer remaining in good standing with Bonchon. This creates a potential risk for the franchisee, as the Area Developer's actions could directly impact their financial obligations to Bonchon.
If the Area Developer fails to meet their obligations, the Bonchon franchisee may be required to pay the standard Initial Franchise Fee and Continuing Royalty. For example, the franchisee would have to pay the difference between the $20,000 initial franchise fee they might have paid under an incentive program and Bonchon's then-applicable standard Initial Franchise Fee. Additionally, they would be obligated to pay the standard royalty fee of 5% of the Restaurant's prior week's Gross Revenues for the entire term of the Franchise Agreement.
Therefore, prospective Bonchon franchisees should carefully evaluate the Area Developer's track record and financial stability before entering into an agreement. Understanding the terms of the Area Development Agreement and the potential consequences of non-compliance is crucial for protecting their investment and ensuring their eligibility for any available incentives.