What specific rights did the Defendants lose as a consequence of the termination of their Franchise Agreements with Bonchon?
Bonchon Franchise · 2025 FDDAnswer from 2025 FDD Document
On April 24, 2023, Bonchon International, Inc., Bonchon U.S.A., Inc., and us (collectively, "Bonchon") filed suit againstSapporo Inc.,BC Alexandria Inc.,Bon Burke Inc.,Sun M.An, andYoung C. Ham a/k/a Ryan Ham (collectively, the "Defendants") in the U.S. District Court, Southern District of New York. The Defendants entered into franchise agreements with Bonchon Franchise LLC for the right to operate four (4) Bonchon Restaurants in Herndon, Virginia; Alexandria, Virginia; Burke, Virginia; and Vienna, Virginia (collectively, the "Franchise Agreements"). On September 15, 2022, Bonchon terminated the Franchise Agreements because of Defendant Ryan Ham's material breach thereof. As a consequence of such termination, Defendants lost all rights to use Bonchon's trademarks, trade dress, confidential information, know-how, and the Bonchon System. However, despite losing the right to operate under Bonchon's proprietary marks, Defendants continued to operate their Restaurants under the "Bonchon" name in violation of their post-termination obligations under the Franchise Agreements. Consequently, Bonchon commenced this action for (i) trademark infringement; (ii) trade dress infringement and unfair competition; (iii) misappropriation of trade secrets under the DTSA; and (iv) breach of contract under New York common law. The Court entered a stipulated Preliminary Injunction on August 10, 2023, pursuant to which Defendants were ordered to immediately cease any use of Bonchon's trademarks, trade dress, trade secrets, and confidential information and to comply with all applicable post-termination provisions of the Franchise Agreements. Within the time provided in the Order, Defendants de-identified their former Bonchon restaurants in compliance with the Order. On April 8, 2024, Young C. Ham a/k/a Ryan Ham and Sophia Sunmin Hahm a/k/a Sun Min An filed for Chapter 7 bankruptcy, which resulted in the discharge of certain debts by Order of the bankruptcy court dated July 23, 2024 (including the debts that Mr. and Mrs. Ham guaranteed under the Franchise Agreements executed by Sapporo Inc., BC Alexandria Inc. and Bon Burke Inc.). Consequently on September 4, 2024, Bonchon filed a motion to discontinue its lawsuit against Defendants, which motion was granted on September 4, 2024.
Source: Item 3 — LITIGATION (FDD pages 11–12)
What This Means (2025 FDD)
According to Bonchon's 2025 Franchise Disclosure Document, a lawsuit was filed against several entities (Sapporo Inc., BC Alexandria Inc., Bon Burke Inc., Sun M.An, and Young C. Ham) who had franchise agreements with Bonchon. These agreements, which allowed them to operate four Bonchon restaurants in Virginia, were terminated on September 15, 2022, due to a material breach by Defendant Ryan Ham. As a direct result of this termination, the Defendants lost all rights to use Bonchon's trademarks, trade dress, confidential information, know-how, and the Bonchon System. This means they could no longer legally operate their restaurants using Bonchon's branding, operational methods, or proprietary information.
Despite the termination and the loss of rights, the Defendants continued to operate their restaurants under the Bonchon name, which led to further legal action. Bonchon initiated a lawsuit alleging trademark infringement, trade dress infringement and unfair competition, misappropriation of trade secrets, and breach of contract. The court issued a Preliminary Injunction on August 10, 2023, ordering the Defendants to immediately cease using Bonchon's trademarks, trade dress, trade secrets, and confidential information. The Defendants subsequently de-identified their former Bonchon restaurants to comply with the court order.
This case highlights the importance of adhering to the terms of the franchise agreement and the potential consequences of breaching those terms. For a prospective Bonchon franchisee, this litigation underscores the value and legal protection afforded to Bonchon's intellectual property and brand identity. It also demonstrates Bonchon's willingness to take legal action to protect its brand and system from unauthorized use.