Under what condition can either party terminate the Bonchon Franchise Agreement due to a material breach?
Bonchon Franchise · 2025 FDDAnswer from 2025 FDD Document
Except as provided in Section 17.01 below ("Unavoidable Delay or Failure to Perform (Force Majeure)"), if you fail to adhere to the Development Schedule in Section 6.01 by either: (1) failing to execute the Franchise Agreement for each Bonchon Business on or before the Due Date of Execution of the Lease specified above, or (2) failing to commence operations of each Bonchon Business on or before the applicable Commencement of Operations Date specified above, then this will constitute a material breach of this Agreement, which, unless you cure it as provided in Section 15.03 of this Agreement, will result in this Agreement being terminated immediately.
Termination of this Agreement for this reason will not be a termination (constructive or otherwise) of any Franchise Agreement(s) entered into by you and us under which you have already commenced the operation of the Bonchon Businesses covered by the Franchise Agreement(s) if you have fully performed and otherwise been in compliance with all of your obligations under the Franchise Agreement(s) in question. You will lose both the right to develop the undeveloped Bonchon Businesses in the Development Territory and the Area Development Fee attributable to the undeveloped Bonchon Businesses, and we may operate or franchise Bonchon Businesses anywhere within the Development Territory without in any way being in violation of this Agreement. This remedy of ours will be in addition to whatever other remedies we may have at law or in equity.
6.03 Time is of the Essence
Subject to the provision of Section 17.01 below ("Unavoidable Delay or Failure to Perform (Force Majeure)"), your timely performance of your obligations under Article 6 of this Agreement is of material importance and is of the essence to this Agreement.
Source: Item 23 — RECEIPTS (FDD pages 92–536)
What This Means (2025 FDD)
According to Bonchon's 2025 Franchise Disclosure Document, Bonchon can terminate the Franchise Agreement if the franchisee fails to perform certain obligations, which constitute a material breach. Specifically, if a franchisee fails to adhere to the Development Schedule by not executing the Franchise Agreement for each Bonchon Business on or before the Due Date of Execution of the Lease or by not commencing operations of each Bonchon Business on or before the applicable Commencement of Operations Date, it will be considered a material breach.
In such cases, Bonchon can terminate the agreement immediately, provided the franchisee does not cure the breach as per Section 15.03 of the agreement. This termination does not affect any existing Franchise Agreements under which the franchisee has already commenced operations and is in full compliance. However, the franchisee will lose the right to develop any undeveloped Bonchon Businesses in the Development Territory and forfeit the associated Area Development Fee. Bonchon retains the right to operate or franchise Bonchon Businesses within the Development Territory without violating the agreement.
Furthermore, the FDD states that timely performance of obligations under Article 6 of the agreement is of material importance. This underscores the significance of adhering to the development schedule and other key obligations outlined in the agreement. Prospective franchisees should carefully review Article 6 and Section 15.03 to understand the specific requirements and potential consequences of failing to meet these obligations.