Under what conditions will Bonchon impose liquidated damages upon termination of the Franchise Agreement?
Bonchon Franchise · 2025 FDDAnswer from 2025 FDD Document
If we terminate this Agreement because of your default or you terminate same through failure to make payment following notice and opportunity to cure (pursuant to Section 17.05 above), you and we hereby agree that the amount of damages which we would incur for premature termination of this Agreement would be difficult, if not impossible, to accurately ascertain and you will pay an amount equal to the average Continuing Royalties owed to us during the 12 months of operation preceding the effective date of the termination multiplied by the lesser of (a) 24 (being the number of months in two full years) or (b) the number of months remaining in the term of the Franchise Agreement (had it not been terminated) (the "Liquidated Damages"). The Liquidated Damages shall not be construed to be a penalty or in lieu of any other payment and shall be paid by you to us within thirty (30) days following such termination. The parties agree that the formula to calculate the Liquidated Damages is a reasonable estimation of the damages that we would incur because of the premature termination of this Agreement. The parties further acknowledge and agree that your payment of such Liquidated Damages is intended to fully compensate us only for damages resulting from the premature termination of this Agreement, and shall not constitute an election of remedies, a waiver of your default under this Agreement, waiver of any termination of this Agreement by you, nor waiver of our claim for other damages and/or equitable relief resulting from the material breach of this Agreement.
The imposition of these Liquidated Damages shall be at our option. We are not required to impose these Liquidated Damages and may, in addition or in lieu thereof, pursue other remedies available to us at law or in equity resulting from your default under this Agreement, including, without limitation, actual damages we incur, if such can be ascertained, and injunctive relief. All such remedies shall be cumulative and non-exclusive. Payment to us of any amount provided for in this Section 17.10 shall not constitute an election of remedies by us or an excuse for performance of your obligations hereunder.
Source: Item 23 — RECEIPTS (FDD pages 92–536)
What This Means (2025 FDD)
According to Bonchon's 2025 Franchise Disclosure Document, liquidated damages may be imposed if Bonchon terminates the Franchise Agreement due to the franchisee's default, or if the franchisee terminates the agreement by failing to make payments after receiving notice and an opportunity to cure the default.
In these instances, the franchisee agrees to pay an amount calculated using a specific formula. This amount is equal to the average Continuing Royalties owed to Bonchon during the 12 months preceding the termination date, multiplied by the lesser of 24 (representing two full years) or the number of months remaining in the franchise term had it not been terminated. This payment is due within 30 days of termination.
Bonchon clarifies that this liquidated damages clause is not considered a penalty but rather a reasonable estimate of the damages they would incur due to the early termination of the agreement. It's also not an exclusive remedy, meaning Bonchon can pursue other available legal or equitable remedies for the franchisee's breach, including actual damages and injunctive relief. The pursuit of other remedies is at Bonchon's option, and they are not obligated to impose liquidated damages.
This clause highlights a significant financial obligation for franchisees who breach the agreement, potentially requiring a substantial payment to Bonchon upon termination. Prospective franchisees should carefully consider these terms and the potential financial implications of default or early termination.