Under the Bonchon franchise agreement, what constitutes a cross-default, specifically regarding agreements between the Licensee (or its affiliates) and the Licensor (or its Affiliates)?
Bonchon Franchise · 2025 FDDAnswer from 2025 FDD Document
Any default or breach by Licensee (or any of its affiliates) of any other agreement between Licensor, or its parent or the subsidiary, affiliate or designee of either entity (collectively, Licensor's "Affiliates") and Licensee (or any of its affiliates) will be deemed a default under this Agreement, and any default or breach of this Agreement by Licensee (or any of its affiliates) will be deemed a default or breach under any and all other agreements between Licensor (or any of its Affiliates) and Licensee (or any of its affiliates). If the nature of such default under any other agreement would have permitted Licensor to terminate this Agreement if default had occurred under this Agreement, then Licensor (or its Affiliates) will have the right to terminate all the other agreements between Licensor (or its Affiliates) and Licensee (or any of its affiliates) in the same manner provided for in this Agreement for termination of this Agreement.
Source: Item 23 — RECEIPTS (FDD pages 92–536)
What This Means (2025 FDD)
According to Bonchon's 2025 Franchise Disclosure Document, a cross-default provision exists within the agreements between the Licensor (Bonchon) and the Licensee (franchisee). This means that if the franchisee (or any of its affiliates) defaults or breaches any agreement with Bonchon (or its affiliates), it will be considered a default under all agreements between the parties. Conversely, any default or breach by the franchisee (or its affiliates) under the primary franchise agreement will trigger a default under any other agreements in place with Bonchon (or its affiliates).
The cross-default clause has significant implications for a prospective Bonchon franchisee. It essentially links all agreements between the franchisee and Bonchon, creating a scenario where a minor infraction in one area could lead to serious repercussions across the board. For example, if a franchisee has a separate supply agreement with Bonchon and fails to meet its obligations under that agreement, Bonchon could use this as grounds to terminate the franchise agreement itself, even if the franchisee is otherwise in good standing.
Furthermore, the FDD states that if the nature of the default under any other agreement would have permitted Bonchon to terminate the License Agreement had the default occurred under the License Agreement, then Bonchon has the right to terminate all other agreements between them and the franchisee. This provision grants Bonchon considerable power and underscores the importance of adhering to all contractual obligations. Franchisees should carefully review all agreements with Bonchon and its affiliates to fully understand the scope of their obligations and the potential consequences of a default. This is not uncommon in franchising, as franchisors want to protect their brand and ensure consistency across all aspects of the business relationship.