Under what circumstances will Bonchon indemnify a party against expenses in a legal proceeding not brought by or in the right of the corporation, specifically regarding attorneys' fees?
Bonchon Franchise · 2025 FDDAnswer from 2025 FDD Document
32.02 Attorneys' Fees – Third Party Actions
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.
32.03 Governing Law
Source: Item 23 — RECEIPTS (FDD pages 92–536)
What This Means (2025 FDD)
According to Bonchon's 2025 Franchise Disclosure Document, Bonchon may require a franchisee to cover legal expenses, including attorney's fees, in certain situations. Specifically, if Bonchon becomes involved in a legal action initiated by a third party due to the franchisee's actions, errors, or omissions related to the franchise agreement, the franchised business, or the Bonchon restaurant, the franchisee is responsible for reimbursing Bonchon's expenses. This includes situations where Bonchon is held liable due to its status as a franchisor under statutory, vicarious, or principal/agent liabilities.
This obligation extends to any litigation or insolvency proceedings involving the franchisee, including bankruptcy proceedings. The franchisee must promptly reimburse Bonchon for reasonable attorneys' fees, experts' fees, court costs, travel, lodging, and all other expenses incurred in such actions, regardless of the outcome of the legal proceedings. Bonchon is also entitled to add all costs of collection, interest, attorneys' fees, and experts' fees to their proof of claim in any insolvency or bankruptcy proceeding filed by the franchisee.
Furthermore, the franchisee is obligated to indemnify, defend, and hold harmless Bonchon and its affiliates from any claims arising from assertions that the franchisee is Bonchon's agent, legal representative, subsidiary, joint venturer, partner, employee, or servant, or that Bonchon is a joint employer of the franchisee's employees. This means that if a third party brings such a claim against Bonchon, the franchisee will be responsible for covering Bonchon's legal costs and any resulting liabilities.
In practical terms, this means a Bonchon franchisee could face significant financial exposure for legal costs if their actions lead to lawsuits against Bonchon. It is important for prospective franchisees to understand the scope of their indemnification obligations and to operate their businesses in a way that minimizes the risk of third-party claims. Franchisees should also maintain adequate insurance coverage to protect themselves against potential liabilities.