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Considering a Bonchon Franchise? Don’t Overlook These 24 Important Franchise Fees

by Franchise Chatter on July 24, 2014

in Chicken Franchises, Chicken Wings Franchise, Franchise Fees

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Don't Invest in a Franchise Until You Check Out This List Find the Ideal Business for You

BonChon Chicken Photo by HawBone

This post was updated on April 25, 2017 to reflect information from Bonchon’s 2017 FDD (Items 5 and 6).

If you are considering a Bonchon franchise, don’t get blindsided by these 24 important franchise fees (from the initial franchise fee, to the royalty fee, to 22 other fees found in Items 5 and 6 of Bonchon’s 2017 FDD).

1.  Initial Franchise Fee:  $40,000

  • If you will open a single Bonchon Business, the Initial Franchise Fee is $40,000, which you must pay in full on the date you sign the Franchise Agreement.

2.  Area Development Fee:  $10,000 per Bonchon Business

  • If you will operate under an Area Development Agreement (in which case you must agree to develop and operate five or more Bonchon Businesses and Restaurants), you must pay an Area Development Fee of $10,000 per Bonchon Business when you sign the Area Development Agreement.
  • The Area Development Fee for each Bonchon Restaurant Business will be applied against the Initial Franchise Fee for that Bonchon Restaurant Business which would otherwise be payable.
  • The Area Development Fee is fully earned when paid and it is not refundable under any circumstances.
  • Your Initial Franchise Fee for each Bonchon Restaurant Business you open under the Area Development Agreement will be calculated according to the following schedule:
  • Businesses 1-2 in Development Schedule:  $40,000
  • Businesses 3-5 in Development Schedule:  $35,000
  • Businesses 6-10 in Development Schedule:  $30,000
  • Businesses 11 and more in Development Schedule:  $25,000
  • Bonchon uses the proceeds from Initial Franchise Fees and Area Development Fees to defray a portion of its expenses in connection with the sale and establishment of franchises, such as:  (1) costs related to developing and improving its services; (2) expenses of preparing and registering the disclosure document; (3) legal fees; (4) accounting fees; (5) costs of obtaining and screening franchisees; and (6) general administrative expenses.
  • Bonchon will not refund any of the Initial Franchise Fee except under the following circumstances, where it will refund 50% of the Initial Franchise Fee minus its expenses:
  • 1.  If you (if the franchisee is an individual) and/or your Operating Principal (or a replacement Operating Principal) fail to successfully complete the Initial Training Program, Bonchon can terminate the Franchise Agreement.
  • 2.  If you fail to comply with the time limits and procedures in Article 6 of the Franchise Agreement in securing your Restaurant Location, then Bonchon can terminate the Franchise Agreement.
  • 3.  If you and Bonchon cannot agree upon a Restaurant Location within 90 days following the date Bonchon signs the Franchise Agreement, then either you or Bonchon can terminate the Franchise Agreement.

3.  Packaging Items, Cooking Utensils, Sweet Sugar, Brushes, Pallets, and Bonchon’s Proprietary Sauce:  $13,010

  • Before your Business opens, you must purchase packaging items, cooking utensils, sweet sugar, brushes, pallets, and Bonchon’s proprietary sauce from Bonchon’s affiliate Bonchon LLC at an estimated cost of $13,010. This cost is not refundable.
  • You pay Bonchon or its affiliates no other fees or payments for services or goods before your Business opens.

4.  Continuing Royalty:  3.5% to 4.75% of Gross Revenues or up to 10.5% to 14.25% while in default of any provision of the Franchise Agreement other than those defaults listed in Sections 17.01 or 17.02

  • Due Date:  Payable weekly on Tuesday of the next week.
  • “Gross Revenues” includes all revenues from the franchised Business.

5.  System Brand Fund Contribution:  2.0% of Gross Revenues

  • Due Date:  Same as Continuing Royalty.
  • Contribution percentage will not change during term of Franchise Agreement.

6.  Required Minimum Expenditure for Local Advertising:  per Market Introduction Program for period beginning one month before scheduled opening and ending three months after opening; then on average at least $1,166 per month through the end of first full calendar year of operations and 2% of the previous year’s Gross Revenues for all subsequent years

  • Due Date:  Monthly pursuant to Market Introduction Program; then monthly/annually.
  • Required expenditure percentage will not change during term of Franchise Agreement.

7.  Advertising Cooperative:  when cooperative formed; minimum of 1% of Gross Revenues; maximum of 2% of Gross Revenues

  • Due Date:  Established by cooperative.
  • Bonchon may form an advertising cooperative for your area and establish fees payable to the cooperative.
  • A company-owned Business will have a vote if it joins. Percentage may change within 1%-2% range and may only be more than 2% if the cooperative changes the maximum under its By-Laws.

8.  Proprietary and Other Designated Products:  varies

  • Due Date:  Upon delivery of products to you.
  • You must buy packaging items, cooking utensils, sweet sugar, brushes, pallets, and Bonchon’s proprietary sauce from Bonchon’s affiliate Bonchon LLC.

9.  Upgrades to Computer and Point-of-Sale Systems; Support for Computer and Point-of-Sale Systems:  $1,500 annually

10.  Testing Fee:  $1,000 to $2,500, depending on the nature and complexity of the testing necessary for the product or service you propose

  • Due Date:  When Bonchon requests.
  • Bonchon may test the product or service of any supplier you propose. Fee for testing pays for Bonchon’s expenses.

11.  Initial Training:  all living and transportation expenses of all trainees. The amounts are unknown and may vary depending upon factors such as the third-party supplier selected and your distance from training. Replacement trainee charge: $4,000 per person.

  • Due Date:  Fee for replacement trainees due before beginning of training; expenses as incurred.
  • Bonchon provides the Initial Training Program for you, your original Operating Principal, and your original Restaurant Manager free of cost. All replacement Operating Principals you appoint later must also pass the Initial Training Program (if you have not passed the Initial Training Program).

12.  On-Site Training and Assistance:  $500 per day

  • Due Date:  When Bonchon requests.
  • You can request additional on-site training and/or assistance at any time. The Franchise Agreement only requires Bonchon to provide on-site training (which will be free of cost) for up to 5 days during your first Restaurant’s opening.

13.  On-Going Training:  expenses and training fees as Bonchon determines in its sole discretion

  • Due Date:  As incurred.
  • Bonchon may from time to time develop additional training programs which you (if an individual), your Operating Principal, and/or other staff or personnel Bonchon designates either may or must attend and successfully complete.
  • Bonchon may also hold an annual conference, convention, or training session. You and/or your Operating Principal must attend.

14.  Insurance:  estimated annual premium $8,000 to $20,000

  • Due Date:  As insurance carrier requires.
  • Insurance company sets the premiums and you pay the insurance company, except that if you fail to pay premiums for required insurance, Bonchon may pay premiums and charge you for them.
  • Premiums may vary depending upon factors such as the insurance company selected and your claims experience.

15.  Relocation:  Bonchon’s costs in considering your request for relocation

  • Due Date:  When Bonchon requests.
  • If you wish to relocate your Restaurant, you must reimburse Bonchon for any reasonable costs it incurs in considering your request.

16.  Taxes:  varies

  • Due Date:  Promptly when due.
  • You must pay Bonchon all taxes it pays, except for its corporate income taxes due to goods or services it furnishes to you, the Initial Franchise Fee, the Area Development Fee, or Continuing Royalties.

17.  Advances:  varies

  • Due Date:  When Bonchon requests.
  • You must pay Bonchon all amounts it advances to third parties for you.

18.  Late Charge:  late payment penalty of 20% and interest in the maximum amount law allows, or if no legal maximum, then 4% above the then-current Wall Street Journal prime rate of interest

  • Due Date:  When Bonchon requests.
  • You must pay a late payment penalty of 20% on any amounts not paid within 15 days of when they were due to Bonchon or its affiliates. You must also pay interest on any past due amounts to Bonchon.

19.  Audit Expenses:  the amount of the audit. Expenses are unknown and may vary depending upon factors such as the auditor selected.

20.  Renewal Fee:  25% of then-current Initial Franchise Fee for Bonchon Businesses

  • Due Date:  Before Bonchon signs a renewal agreement (“Successor Agreements”).

21.  Transfer Fee:  $15,000 or such greater amount as is necessary to reimburse Bonchon for its reasonable costs and expenses associated with the application for transfer

  • Due Date:  Before Bonchon approves the transfer.

22.  Management Fee on Death or Disability:  greater of (a) two times the compensation paid to individual(s) Bonchon assigns to operate Business, or (b) 10% of Business’s weekly Gross Revenues

  • From your death or disability or the death or disability of your last surviving owner (if you are a business entity), until a new Operating Manager assumes control, Bonchon may operate the Business, but will have no obligation to do so.
  • If it does, then Bonchon will deduct its expenses from the Business’s Gross Revenues and pay itself the management fee.
  • Management fee will be in addition to Continuing Royalties due Bonchon. It will remit any remaining funds to your Estate.
  • Estate must pay Bonchon any deficiency in sums due it under the Franchise Agreement within 10 days of Bonchon notifying the Estate of deficiency.

23.  Indemnification:  varies

  • You indemnify Bonchon from certain losses and expenses.

24.  Attorneys’ and Experts’ Fees, Court Costs:  the amount of these fees and costs are unknown and may vary depending upon factors such as the attorneys and experts selected and the court costs

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