Under what conditions will the Bonchon franchise agreement automatically terminate without notice if a petition in bankruptcy is filed?
Bonchon Franchise · 2025 FDDAnswer from 2025 FDD Document
You will be in default of this Agreement, and all rights granted in this Agreement will immediately and automatically terminate and revert to us without notice to you, if: you become insolvent; you or any of the Bonchon Businesses or any Guarantor is adjudicated as bankrupt or insolvent; all or a substantial part of the assets thereof are assigned to or for the benefit of any creditor or creditors; a petition in bankruptcy is filed by or against you or any of the Bonchon Businesses or Guarantor thereof and is not immediately contested and/or dismissed within sixty days from filing; you admit in writing your inability to pay your debts when due; you, your franchised Business(es) and any affiliate or Guarantor thereof cause, permit or acquiesce in an order for relief under the U.S. Bankruptcy Code or any other applicable federal or state bankruptcy, insolvency, reorganization, receivership or other similar law now or hereafter in effect, or consent to the entry for
Source: Item 23 — RECEIPTS (FDD pages 92–536)
What This Means (2025 FDD)
According to Bonchon's 2025 Franchise Disclosure Document, the franchise agreement can be automatically terminated without notice if a petition in bankruptcy is filed under specific conditions. This occurs if a petition in bankruptcy is filed by or against the franchisee, any of the Bonchon Businesses, or a guarantor, and the petition is not immediately contested and/or dismissed within sixty days from filing.
This clause means that if a franchisee or their business faces severe financial distress leading to a bankruptcy filing, Bonchon has the right to immediately terminate the franchise agreement. The franchisee has a limited time frame of 60 days to contest or dismiss the bankruptcy petition to avoid automatic termination. Failure to do so results in the immediate loss of the franchise rights.
This type of provision is relatively standard in franchise agreements, as franchisors need to protect their brand and system standards. Bankruptcy or insolvency can significantly impact a franchisee's ability to maintain these standards, potentially harming the overall Bonchon brand. Franchisees should be aware of this clause and understand the implications of financial instability on their franchise agreement.