Under what circumstances will Bonchon terminate a franchisee's exclusive right to develop and operate Bonchon businesses within a specific geographic trade area?
Bonchon Franchise · 2025 FDDAnswer from 2025 FDD Document
Notwithstanding the foregoing, you acknowledge, understand and expressly agree that 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 Section 6.01 of this Agreement with respect to the other geographic territories 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 this Agreement except as we are otherwise permitted in Section 3.03 below or under the Franchise Agreement.
Source: Item 23 — RECEIPTS (FDD pages 92–536)
What This Means (2025 FDD)
According to Bonchon's 2025 Franchise Disclosure Document, a franchisee's exclusive right to develop and operate Bonchon businesses within a specific geographic trade area can be terminated under certain conditions, specifically the 'Trade Area Satisfaction Exception.' This exception applies when the Development Territory is comprised of various geographic trade areas within one or more cities, states, or regions, and Bonchon designates a specific number of businesses that the franchisee may develop or operate within each area.
Once the franchisee has developed and commenced operations of the specified number of Bonchon businesses in a particular geographic trade area, their exclusive right to further develop in that specific area terminates. For example, if a franchisee has the right to develop two Bonchon businesses in City A, their development rights in City A cease once those two businesses are operational. This allows Bonchon to develop, operate, or grant others the right to develop and operate additional Bonchon businesses in City A, even if the franchisee has not fulfilled their development obligations in other areas within the Development Territory, such as City B and City C.
However, it's important to note that Bonchon or any third party cannot develop and operate a Bonchon business within the Protected Territory granted under the Franchise Agreement for each of the Bonchon restaurants that the franchisee developed in City A, unless otherwise permitted in Section 3.03 of the Franchise Agreement. This ensures that while the franchisee's development rights in a specific geographic area may be terminated after meeting the specified number of businesses, their Protected Territory for existing restaurants remains intact.