What is the scope of the non-competition covenant during the term of the Bonchon franchise?
Bonchon Franchise · 2025 FDDAnswer from 2025 FDD Document
| Provision | Section in Franchise Agreement* | Summary |
|---|---|---|
| the transfer and pay our On-site Inspection Upon Transfer Fee. Either you or the transferee must, at your/its expense, upgrade the Bonchon Restaurant to conform with then-current standards and specifications within the time we reasonably specify. t. You must pay us a transfer fee of $15,000 or such greater amount as is necessary to reimburse us for our reasonable costs and expenses associated with the application for transfer. Notwithstanding the foregoing, there will be no transfer fee if the assignee is a member of your immediate family. \nu. You must correct any existing deficiencies of the Restaurant of which we have notified you. (Subject to state law.) | ||
| n. Our right of first | Section 14.06 | We can match any offer for your Business. (Subject to state law.) |
| refusal to purchase | ||
| your business | ||
| o. Our option to purchase your business | Section 19.01 | We have the option to buy your franchised Business's assets upon termination or expiration. (Subject to state law.) |
| p. Your death or disability | Section 14.05 | On your death or disability your rights pass to your "Estate". Your Estate may continue operating the Business if it provides an acceptable Operating Principal and General Manager. This Operating Principal must successfully complete our next Initial Training Program or Partner Training Program (as applicable) and assume full-time operation of the franchise within 1 month of your death or disability. From the date of your death or disability until an Operating Principal assumes full time control, we can operate your Business, but need not do so. See Item 6. Or, the Estate may sell the franchise in accordance with the requirements described in m. above. (Subject to state law.) |
|
Sections 12.02 | No involvement in competing business anywhere in U.S. (Subject to state law.) |
| covenants during the |
Source: Item 17 — RENEWAL, TERMINATION, TRANSFER AND DISPUTE RESOLUTION THE FRANCHISE RELATIONSHIP (FDD pages 71–81)
What This Means (2025 FDD)
According to Bonchon's 2025 Franchise Disclosure Document, during the term of the franchise agreement, franchisees are prohibited from involvement in any competing business anywhere in the U.S. This non-compete covenant is detailed in Section 12.02 of the Franchise Agreement and is subject to state law. This means that while operating a Bonchon franchise, a franchisee cannot own, operate, or be involved in any other business that competes with Bonchon anywhere within the United States.
This in-term non-compete is fairly standard in the franchise industry, as franchisors want to protect their brand and prevent franchisees from using proprietary information or business models to benefit competing ventures. The breadth of the restriction—applying anywhere in the U.S.—is more extensive than some franchises, which might limit the scope to a specific radius around the franchised location or within a particular state.
Prospective Bonchon franchisees should carefully consider the implications of this broad non-compete clause. It effectively prevents them from engaging in any other restaurant or food-related business, or any other business deemed competitive with Bonchon, while they are a franchisee. Violation of this covenant is grounds for termination of the franchise agreement, as indicated in Item 17, Section 17.01 and 17.02, which states that failure to comply with the in-term covenant not to compete is a non-curable default. Franchisees should seek legal counsel to fully understand the scope and enforceability of this clause in their specific state.