Under what circumstances will a Bonchon franchisee be required to reimburse Bonchon for costs and expenses, including accounting and attorneys' fees, even if a formal legal proceeding is not initiated?
Bonchon Franchise · 2025 FDDAnswer from 2025 FDD Document
If we become a party to any action or proceeding commenced or instituted against us by a third party arising out of or relating to this Agreement, any and all related agreements, the franchised Business or your Bonchon Restaurant as a result of any claimed or actual act, error or omission of yours (and/or any of your officers, directors, shareholders, management, employees, contractors and/or representatives, (collectively, the "Franchisee Parties")), your Restaurant and/or the franchised Business by virtue of statutory, "vicarious", "principal/agent" or other liabilities asserted against or imposed on us as a result of our status as Franchisor; or if we become a party to any litigation or any insolvency proceeding involving you pursuant to any bankruptcy or insolvency code (including any
adversary proceedings in conjunction with bankruptcy or insolvency proceedings), then you will be liable to, and must promptly reimburse us for, the reasonable attorneys' fees, experts' fees, court costs, travel and lodging costs and all other expenses we incur in such action or proceeding regardless of whether such action or proceeding proceeds to judgment. In addition, we will be entitled to add all costs of collection, interest, attorneys' fees and experts' fees to our proof of claim in any insolvency or bankruptcy proceeding you file.
Source: Item 23 — RECEIPTS (FDD pages 92–536)
What This Means (2025 FDD)
According to Bonchon's 2025 Franchise Disclosure Document, a franchisee may be required to reimburse Bonchon for costs and expenses, including accounting and attorneys' fees, under specific circumstances, even if a formal legal proceeding is not initiated. This obligation arises if Bonchon becomes involved in an action or proceeding initiated by a third party due to a claimed or actual act, error, or omission by the franchisee or their related parties. This includes situations where liabilities are asserted against Bonchon because of their status as the franchisor.
Specifically, if a third party brings a claim against Bonchon related to the franchise agreement, the franchisee's restaurant, or the franchisee's actions, the franchisee is responsible for covering Bonchon's associated costs. These costs include reasonable attorneys' fees, experts' fees, court costs, travel, and lodging expenses. This reimbursement obligation exists regardless of whether the action proceeds to a final judgment.
This condition places a significant financial responsibility on Bonchon franchisees. They must ensure their business operations are compliant and do not create legal liabilities for Bonchon. The broad scope of potential claims—including those arising from errors or omissions by the franchisee's staff—means franchisees must invest in thorough training, robust operational procedures, and adequate insurance coverage to mitigate these risks. The obligation to cover Bonchon's legal costs, even without a judgment against the franchisee, highlights the importance of proactive risk management in operating a Bonchon franchise.