Under what condition can Bonchon Franchise LLC terminate the Franchise Agreement if a franchisee violates restrictions on security interests?
Bonchon Franchise · 2025 FDDAnswer from 2025 FDD Document
Without our prior written consent (which shall not be unreasonably withheld, delayed or conditioned), you may not permit any mortgage, lien, pledge or other security interest in respect of any of your business entity's shares, equity interests or other ownership interests. Any violation of this restriction will give us the right to terminate this Agreement immediately upon notice to you.
You shall not permit any mortgage, lien, pledge or other security interest in respect of any of your business entity's shares, equity interests or other ownership interests without our prior written consent. Any violation of the preceding restriction will give us the right to terminate this Agreement immediately upon notice to you.
Source: Item 23 — RECEIPTS (FDD pages 92–536)
What This Means (2025 FDD)
According to Bonchon's 2025 Franchise Disclosure Document, Bonchon Franchise LLC can terminate the Franchise Agreement immediately if a franchisee violates restrictions on security interests. Specifically, a franchisee cannot permit any mortgage, lien, pledge, or other security interest in respect of any of the business entity's shares, equity interests, or other ownership interests without Bonchon's prior written consent. Bonchon states that this consent will not be unreasonably withheld, delayed, or conditioned.
This provision is designed to protect Bonchon's interests by ensuring that the franchisee's business remains financially stable and free from undue encumbrances. Security interests could potentially give creditors control over the franchise, which could disrupt operations and negatively impact the Bonchon brand.
For a prospective Bonchon franchisee, this means that obtaining financing or making significant changes to the ownership structure of their business requires careful planning and communication with Bonchon. Failure to obtain prior written consent for any security interest could result in immediate termination of the Franchise Agreement, potentially leading to significant financial losses. Franchisees should maintain open communication with Bonchon and seek legal counsel to ensure full compliance with this requirement.