Under what circumstances is Bonchon required to compensate a franchisee for inventory, supplies, equipment, fixtures, and furnishings upon non-renewal of the franchise?
Bonchon Franchise · 2025 FDDAnswer from 2025 FDD Document
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The expiration or termination of this Agreement will be without prejudice to our rights against you, and will not relieve you of any of your obligations to us at the time of expiration or termination, or terminate your obligations which by their nature survive the expiration or termination of this Agreement.
19. OUR OPTION UPON TERMINATION OR EXPIRATION
19.01 Option to Purchase Your Franchised Business's Assets
- A. Upon the termination or expiration of this Agreement for any reason, we, any of our affiliates, and/or any nominee or designee we name are hereby granted an option, exercisable within 30 days after the termination becomes effective, to purchase as soon as practicable thereafter (including any period necessary for the obtaining of governmental approvals and consents of the concerned lessor[s]) all of your operating assets relating to the franchised Business. We may exclude from the assets we elect to purchase, cash or its equivalent and any leasehold improvements, equipment, fixtures, furnishings, signs, materials and supplies that are not necessary or appropriate (in function or quality) to the Restaurant's operation or that we have not approved as meeting the System standards, and the purchase price will reflect such exclusions. The date on which such purchase is closed will be referred to as the "closing date". The following terms and conditions will apply to the option granted by this Article 19:
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- All saleable or usable inventory will be purchased at your original cost, less the cost of shipping such inventory to us and less a 25% restocking fee. As used in this Agreement, the term "saleable or usable" is defined to mean all items of merchandise which have been paid for by you, belong to you and are in a condition proper for current use or sale, specifically excluding items which require reconditioning or reworking; items which are not useable or saleable through normal distribution channels; items which are in excess of normal requirements for a three month period; items which are out of code, damaged and/or deteriorated; and, consigned merchandise.
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- All land, facilities and vehicles owned by you (or any affiliate) and utilized by the franchised Business will be purchased for an amount equal to their appraised value as determined by an appraiser we select and you and we share the expense of. If you own the Bonchon Restaurant Location, we may instead of purchasing the Restaurant Location require you to execute and deliver to us or our designee a lease for the Restaurant Location on commercially reasonable terms. If the parties cannot agree on such terms within a reasonable time, we will designate an independent appraiser. The appraiser's determination will be binding, and you must execute and deliver to us a lease for the Restaurant Location on the terms determined by the appraiser to be commercially reasonable. We and you will each pay 50% of the fee charged by the independent appraiser.
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Source: Item 23 — RECEIPTS (FDD pages 92–536)
What This Means (2025 FDD)
According to Bonchon's 2025 Franchise Disclosure Document, upon termination or expiration of the Franchise Agreement, Bonchon has the option to purchase a franchisee's operating assets related to the franchised business. This option is exercisable within 30 days after the termination becomes effective. The purchase would occur as soon as practicable, including any period necessary for governmental approvals or lessor consents.
However, Bonchon may exclude certain assets from the purchase, such as cash, leasehold improvements, and any equipment, fixtures, furnishings, signs, materials, and supplies that are not necessary or appropriate for the Restaurant's operation or do not meet Bonchon's System standards. The purchase price will reflect these exclusions. For any saleable or usable inventory that Bonchon does purchase, it will be at the franchisee's original cost, less the cost of shipping the inventory to Bonchon and a 25% restocking fee. Saleable or usable inventory is defined as items paid for by the franchisee, belonging to the franchisee, and in a condition proper for current use or sale, excluding items needing reconditioning, not useable through normal channels, in excess of three-month requirements, out of code, damaged, or consigned.
If the franchisee owns the land, facilities, and vehicles used by the franchised business, Bonchon will purchase these for an amount equal to their appraised value, as determined by an appraiser selected jointly by Bonchon and the franchisee, with the expense shared. Instead of purchasing the Restaurant Location, Bonchon may require the franchisee to execute a lease for the Restaurant Location on commercially reasonable terms.
If a franchisee terminates the agreement through failure to make payment following notice and opportunity to cure, the franchisee must pay Bonchon for losses and expenses, including damages, costs, and attorney's fees. This obligation will give rise to a lien in Bonchon's favor against the franchisee's assets, property, furnishings, equipment, signs, fixtures, and inventory.