Does Bonchon prohibit franchisees from being party to any business entity formation documents that may conflict with the Bonchon Franchise Agreement?
Bonchon Franchise · 2025 FDDAnswer from 2025 FDD Document
- D. All of your business entity's organizational documents (including any partnership, partnership agreements, incorporation documents, organization/formation documents, bylaws, operating agreements, shareholders agreements, buy/sell or equivalent agreements, and trust instruments) will recite that the issuance or transfer of any Interest in you is restricted by the terms of this Agreement, and that the sole purpose for which you are formed (and the sole activity in which you are or will be engaged) is the conduct of a franchised Business pursuant to one or more franchise agreements from us and that your activities will be exclusively confined to such purpose. Your organizational documents will also include a "Supremacy of Franchise Agreement" clause reciting the following: "To the extent any provision of this Agreement conflicts, violates or is inconsistent with any provision of the Bonchon Franchise Agreement, the parties hereto agree that the provisions of such Franchise Agreement shall supersede the same and that the parties hereto shall enter into such amendments to this agreement as are necessary in order to make the relevant provisions consistent with or non-violative of the provisions of the Bonchon Franchise LLC Franchise Agreement."
- E. You will maintain stop instructions against the transfer on your business entity's corporate records of any securities or other ownership interests, and will not issue securities or other evidences of ownership without the following legend printed legibly and conspicuously on the face of the security or other evidence of ownership:
- "The transfer of this certificate and the interests it represents are subject to the terms and conditions of one or more Franchise Agreements with BONCHON FRANCHISE LLC, and to the restrictive provisions of the organizational documents of the issuer. Please refer to those documents for the terms of the restrictions."
- F. Without our prior written consent (which shall not be unreasonably withheld, delayed or conditioned), you may not permit any mortgage, lien, pledge or other security interest in respect of any of your business entity's shares, equity interests or other ownership interests. Any violation of this restriction will give us the right to terminate this Agreement immediately upon notice to you.
You shall not permit any mortgage, lien, pledge or other security interest in respect of any of your business entity's shares, equity interests or other ownership interests without our prior written consent. Any violation of the preceding restriction will give us the right to terminate this Agreement immediately upon notice to you.
Source: Item 23 — RECEIPTS (FDD pages 92–536)
What This Means (2025 FDD)
According to Bonchon's 2025 Franchise Disclosure Document, if a franchisee operates as a business entity, Bonchon requires that the entity's organizational documents explicitly state that the terms of the Franchise Agreement take precedence over any conflicting provisions within those documents. This is achieved through a "Supremacy of Franchise Agreement" clause. This clause ensures that the Franchise Agreement remains the governing document in case of inconsistencies.
Specifically, the organizational documents must include a statement ensuring that the issuance or transfer of any interest in the franchisee's business entity is restricted by the terms of the Bonchon Franchise Agreement. The documents must also state that the sole purpose of the business entity is to conduct a franchised Bonchon business. These stipulations are designed to protect Bonchon's interests and maintain uniformity across all franchise operations.
Furthermore, Bonchon mandates that the franchisee maintains stop instructions against the transfer of any securities or ownership interests within the business entity's corporate records. Any securities issued must bear a legend indicating that their transfer is subject to the terms and conditions of the Franchise Agreement and the business entity's organizational documents. This measure provides notice to potential investors or transferees about the restrictions imposed by the franchise agreement. Bonchon also requires prior written consent before a franchisee can permit any mortgage, lien, pledge, or other security interest in the business entity's shares, equity interests, or other ownership interests. Violation of this restriction can result in immediate termination of the Franchise Agreement.