What are the specific obligations of a Bonchon franchisee regarding the development schedule under an Area Development Agreement (Item 9), and how does the franchisor assist with this process (Item 11)?
Bonchon Franchise · 2025 FDDAnswer from 2025 FDD Document
sistance.**
Pre-Opening Obligations
Area Development Agreement
If you sign an Area Development Agreement with us, then, under the Area Development Agreement, we will:
- (1) Designate your Development Territory, the number of Businesses you will open, and the development schedule setting the timetable you will follow for opening the Businesses, based on our mutual agreement. (Area Development Agreement, Section 3.01 and 6.01) You and we will decide on your Development Territory together, considering factors such as the general locations and neighborhoods and proximity to customers in the Development Territory we are considering; traffic patterns in the Development Territory; co-tenant attractiveness in the sites available in the Development Territory; size of the available spaces in the Development Territory; age and condition of the buildings in which the Restaurant Locations might be situated in the Development Territory being considered; the availability of locations and necessary zoning in the Development Territory; and, the location of competitors in the Development Territory. In deciding on the number of Bonchon Businesses and the development schedule for opening them, you and we will consider factors such as the potential total number of Businesses in the Development Territory; how aggressive the opening schedule should be; your experience, if any, in the industry; your experience in franchising; and, the capital commitment you are able and willing to make. If you and we do not agree on the Development Territory, the number of Businesses to be opened and the development schedule, then you and we will not sign an Area Development Agreement. We do not approve or disapprove of the site for your first Restaurant Location under the Area Development Agreement, we do this under, and pursuant to the terms and conditions set forth in, the unit Franchise Agreement and in accordance with our then-current standards imposed in connection with same. However, we do approve and disapprove the sites for your subsequent Restaurant Locations pursuant to the terms and conditions set forth in, the Area Development Agreement and in accordance with our then-current standards imposed in connection with same.
- (2) Under the Unit Franchise Agreements, approve or disapprove the sites you propose you for your Restaurant Locations within your Development Territory, perform the training, instruction, assistance and other activities and services for which the Franchise Agreements provide. (Area Development Agreement, Section 8.01).
Franchise Agreement
Before you open your Restaurant, we will:
(1) Approve or disapprove a site for your Restaurant Location. We do not currently own sites for
leasing to franchisees. You select the site for your Restaurant Location, and we approve or disapprove your proposed site. (Franchise Agreement, Section 6.01) If you and we cannot agree upon a Restaurant Location within 90 days following the date we sign the Franchise Agreement, then we can terminate the Franchise Agreement. If we elect to terminate the Franchise Agreement, then you must sign a General Release in the form of Exhibit D to this Disclosure Document. You will not be entitled to a refund of your Initial Franchise Fee.
We may require you to submit maps, completed checklists, photographs, copies of proposed leases, diagrams of the premises with measurements and other information and materials which we may reasonably require to evaluate your proposed Restaurant Location. We may visit your proposed Restaurant Location, but the Franchise Agreement does not require us to do so. If you request that we visit the proposed Restaurant Location, the first visit will be free of cost, with any additional visits costing $500 per day plus the cost of our travel expenses.
We consider the following factors in approving sites: the market potential and estimated volume of your Business; the general location and neighborhood and nearness to customers; store visibility; traffic patterns; co-tenant attractiveness; size of the space; age and condition of the shopping center or building; the location and convenience of entrances; the availability of parking; the availability of locations and necessary zoning; the location of competitors; expected overhead; and, lease terms.
What This Means (2025 FDD)
According to Bonchon's 2025 Franchise Disclosure Document, franchisees entering into an Area Development Agreement have specific obligations regarding the development schedule. Bonchon will designate the Development Territory, the number of Businesses to be opened, and the development schedule, setting the timetable to be followed for opening the Businesses, based on mutual agreement. Factors such as location, traffic patterns, co-tenant attractiveness, size and condition of available spaces, zoning, and the location of competitors are considered when determining the Development Territory. The number of Bonchon Businesses and the development schedule take into account the potential total number of Businesses in the Development Territory, the aggressiveness of the opening schedule, the franchisee's experience, and the capital commitment the franchisee is able and willing to make.
Bonchon's assistance includes approving or disapproving sites for Restaurant Locations within the Development Territory under the Unit Franchise Agreements, as well as providing training, instruction, and other support activities and services as outlined in the Franchise Agreements. However, Bonchon does not approve or disapprove the site for the first Restaurant Location under the Area Development Agreement; this is done under the unit Franchise Agreement.
The franchisee has the right and obligation to open and operate the agreed-upon number of Bonchon Businesses within the Development Territory according to the Development Schedule in Section 6.01 of the Area Development Agreement. Failure to adhere to the Development Schedule, either by not executing Franchise Agreements or not commencing operations by the specified dates, can result in termination of the Area Development Agreement. If the agreement is terminated for this reason, the franchisee will not be entitled to open any further Bonchon Businesses in the Development Territory and will not receive a refund of Area Development Fees paid for undeveloped Bonchon Businesses, though existing Franchise Agreements remain in effect if the franchisee is in compliance.