What is the 'Trade Area Satisfaction Exception' in relation to the Bonchon Area Development Agreement?
Bonchon Franchise · 2025 FDDAnswer from 2025 FDD Document
If your Development Territory is comprised of various geographic trade areas within a particular or one or more cities, states or regions and we designate a specific number of Businesses that you may develop or operate within each geographic trade area, your exclusive right to develop and operate Bonchon Businesses within a certain geographic trade area will terminate once you have developed the specified number of Bonchon Businesses in the subject geographic trade area. For the avoidance of doubt, if your Development Territory includes City A, City B and City C and we grant you the right to develop two Bonchon Businesses in each city, then your right to develop Bonchon Businesses in City A will cease once you developed and commenced operations of two Bonchon Businesses. Accordingly, we will have the right to develop and operate or grant a third party the right to develop and operate additional Bonchon Businesses in City A, even if you have not fully satisfied your development obligations under your Area Development Agreement with respect to the other geographic trade areas within the Development Territory (e.g. in City B and City C) (the "Trade Area Satisfaction Exception"); provided, however, that neither we nor any third party will have the right to develop and operate a Bonchon Business within the Protected Territory granted under the Franchise
Agreement for each of the Bonchon Restaurants that you developed in City A pursuant to the Area Development Agreement except as otherwise permitted in the Franchise Agreement.
Source: Item 12 — TERRITORY (FDD pages 60–65)
What This Means (2025 FDD)
According to Bonchon's 2025 Franchise Disclosure Document, the 'Trade Area Satisfaction Exception' relates to the company's right to develop additional Bonchon restaurants in a specific geographic trade area within a franchisee's Development Territory. This exception comes into play when the Development Territory is divided into various geographic trade areas (e.g., cities), and Bonchon designates a specific number of restaurants the franchisee can develop in each area.
Specifically, the 'Trade Area Satisfaction Exception' means that if a franchisee has developed the specified number of Bonchon restaurants in a particular geographic trade area (like City A), their exclusive right to develop further Bonchon businesses in that specific area terminates. Even if the franchisee hasn't fulfilled their overall development obligations for the entire Development Territory (e.g., Cities B and C), Bonchon reserves the right to develop or grant others the right to develop additional Bonchon restaurants in the area where the obligation has been met (City A).
However, Bonchon, or any third party, cannot develop or operate a Bonchon restaurant within the Protected Territory granted under the Franchise Agreement for each Bonchon restaurant the franchisee has already developed in that city. This exception allows Bonchon to expand more rapidly in successful areas, but it also means a franchisee's exclusivity in a specific part of their territory can end prematurely if they quickly meet their development quota in that area. This could impact the franchisee's long-term growth potential within their Development Territory.