Under what conditions can Bonchon withhold permission to pledge, encumber, or give a security interest in the Bonchon Franchise Agreement?
Bonchon Franchise · 2025 FDDAnswer from 2025 FDD Document
You will have no right to pledge, encumber, hypothecate or otherwise give any third party a security interest in this Agreement, the Franchise Agreements or the Bonchon Businesses in any manner without our prior written permission, which we may withhold for any reason.
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.
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- 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. .
Source: Item 23 — RECEIPTS (FDD pages 92–536)
What This Means (2025 FDD)
According to Bonchon's 2025 Franchise Disclosure Document, Bonchon maintains significant control over a franchisee's ability to leverage the franchise agreement or business interests as collateral. Bonchon can deny a franchisee the right to pledge, encumber, or give a security interest in the Franchise Agreement for any reason. This means a franchisee may not be able to use the franchise itself as collateral for a loan or other financial arrangement without Bonchon's explicit approval. This broad discretion gives Bonchon considerable power over the franchisee's financial activities related to the business.
Furthermore, if the franchisee is a business entity, they 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. However, this consent shall not be unreasonably withheld, delayed, or conditioned. If a franchisee violates this restriction, Bonchon has the right to terminate the Franchise Agreement immediately upon notice.
These stipulations are designed to protect Bonchon's interests and ensure that franchisees do not take on financial obligations that could jeopardize the brand or the operation of the franchise. While Bonchon has broad authority to deny permission in the first instance, they must act reasonably when the request involves the franchisee's business entity's shares or equity interests. Prospective franchisees should carefully consider these restrictions and discuss any potential financing needs with Bonchon before entering into a franchise agreement.