Is Bonchon required to maintain the System Brand Fund contributions in a separate account?
Bonchon Franchise · 2025 FDDAnswer from 2025 FDD Document
We need not maintain the money paid by franchisees to the Fund and income earned by the Fund in a separate account, but we may not use this money for any purposes other than those provided for in the Franchise Agreement. We can spend money from the Fund for our reasonable administrative costs and overhead for activities reasonably related to the administration of the Fund and advertising programs for franchisees, including, for example, preparing marketing and advertising materials; working with advertising agencies, advertising placement services and creative talent; collecting Fund contributions and preparing an accounting of contributions to the Fund and the annual statement of Fund contributions and expenditures described below; the Fund's administrative costs; travel expenses of personnel while they are on Fund business; meeting costs, including franchisee conferences; overhead relating to Fund business; a management fee for us (or an affiliate); and other expenses we incur in activities reasonably related to administering or directing the Fund and its programs, including taxes we must pay on Fund contributions we receive; conducting market research, public relations, and creating, preparing, and producing advertising, promotions, and marketing materials; and, otherwise devoting our personnel, resources and/or funds for the benefit of the Fund.
Within 60 days following the close of our fiscal year, we will prepare (but not audit) a statement detailing Fund income and expenses for the fiscal year just ended. We will send you a copy of this statement upon request.
We will spend most contributions to the Fund for advertising purposes during the fiscal year in which the contributions are made. If not all advertising funds are spent in the fiscal year in which they accrue, we will use the remaining amount in the future for the benefit of the franchisees and the System. If franchisees request, in writing, we will provide them with an annual accounting of how advertising funds are spent, as stated in the paragraph immediately above.
Source: Item 11 — FRANCHISOR'S ASSISTANCE, ADVERTISING, COMPUTER SYSTEMS AND TRAINING (FDD pages 45–60)
What This Means (2025 FDD)
According to Bonchon's 2025 Franchise Disclosure Document, Bonchon is not required to keep the money paid by franchisees to the System Brand Fund in a separate account. However, Bonchon is not allowed to use the money for purposes other than those outlined in the Franchise Agreement. This means that while the funds are not legally segregated, they are restricted in terms of how they can be spent.
Bonchon can use money from the fund for reasonable administrative costs and overhead related to administering the fund and advertising programs. These expenses include preparing marketing materials, working with advertising agencies, collecting fund contributions, preparing accountings of contributions, travel expenses, meeting costs, and a management fee for Bonchon or its affiliates. They can also use the funds for taxes on contributions, market research, public relations, and creating advertising materials.
Within 60 days after the close of Bonchon's fiscal year, they will prepare a statement detailing the fund's income and expenses, and will provide a copy to franchisees upon request. Bonchon intends to spend most of the contributions during the fiscal year in which they are made, but any remaining funds will be used in the future for the benefit of franchisees and the Bonchon system. This provides some assurance that contributions will be used for their intended purpose, even if there is no legal requirement to keep the funds separate.