Under what condition can Bonchon Franchise LLC terminate the Franchise Agreement immediately if the franchisee is a business entity?

According to Bonchon's 2025 Franchise Disclosure Document, if a franchisee is a business entity, Bonchon can terminate the Franchise Agreement immediately if the franchisee permits 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 ownership and financial structure of its franchisees remain stable and under its control. By requiring consent for any encumbrances on the business entity's ownership interests, Bonchon aims to prevent franchisees from taking on excessive debt or transferring control to parties that may not be aligned with Bonchon's standards and practices.

For a prospective Bonchon franchisee, this means that they must seek Bonchon's approval before using their business's shares or equity as collateral for any financing. Failure to do so can result in immediate termination of the franchise agreement, potentially leading to significant financial losses. Franchisees should carefully consider this restriction when planning their business's financial strategy and ensure they maintain open communication with Bonchon regarding any potential encumbrances on their ownership interests.