What statement must Bonchon franchisees include in their business entity's organizational documents regarding the purpose of the entity?
Bonchon Franchise · 2025 FDDAnswer from 2025 FDD Document
nts must provide that its activities will be confined exclusively to the operation of the franchised Business.
- C. You must promptly notify us in writing of any change in any of the information specified, or in any document referred to, herein.
- 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.
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 their Bonchon business through a separate business entity, the organizational documents of that entity must include a specific statement about the entity's purpose. This statement must declare that the sole purpose for which the entity is formed, and the only activity it will engage in, is to conduct a franchised Bonchon business, operating under one or more franchise agreements with Bonchon. The entity's activities must be exclusively confined to this purpose.
This requirement ensures that the franchisee's business entity is solely focused on operating the Bonchon franchise and prevents the entity from engaging in other business ventures that could potentially conflict with the franchise agreement. It also protects Bonchon by ensuring that the franchisee's entity cannot claim its obligations are limited by other business activities.
In addition to the statement of purpose, the organizational documents must also include a "Supremacy of Franchise Agreement" clause. This clause states that if any provision in the entity's organizational documents conflicts with the Bonchon Franchise Agreement, the Franchise Agreement will take precedence. The parties involved must then amend the organizational documents to align with the Franchise Agreement. This clause reinforces the primacy of the franchise agreement in governing the relationship between Bonchon and the franchisee's business entity.
These stipulations are typical in franchising, as franchisors like Bonchon seek to maintain tight control over their brand and ensure uniformity across all franchise locations. By requiring these specific statements in the franchisee's business entity documents, Bonchon aims to safeguard its interests and maintain consistency in operations.