Operations

Federal judge orders former Bonchon franchisee to close and rebrand

The operator of 4 units was terminated from the franchise system but continued to operate. The franchisor won a preliminary injunction to shut them down.
Bonchon
Bonchon is known for its Korean-style fried chicken. |Photo courtesy of Bonchon.

A federal judge has ordered the closure of four restaurants that were previously Bonchon franchise units that continued to operate after the franchisor terminated the franchise agreement.

The four restaurants in Northern Virginia were operated as Bonchon locations by Ryan Ham, a former franchisee who controlled the individual businesses under the names Sapporo Inc., BC Alexandria Inc., Bon Burke Inc., and Bon One Inc. Ham first signed on as a franchisee in December 2013 to open the restaurant in Herndon, Va. In 2015, he added a unit in Alexandria, Va., and in 2020 signed agreements to add two more: Burke, Va., and Vienna, Va., though the latter two never opened to the public, according to court documents.

Last year, however, the franchisor learned that Ham was also operating a “bbq chicken restaurant” in Falls Church, Va., that was considered a competitive business, in violation of the franchise agreement. As a result, Ham was terminated as a franchisee in October 2022.

The franchisor gave Ham several extensions to give time for him to sell the properties, but he did not. Even after agreeing to stop using the trademarks and trade dress, he continued to operate the restaurants as Bonchon locations, selling the brand’s proprietary hand-breaded and double-fried chicken, the company said.

The final termination date was in March this year, but when a Bonchon representative visited the units in April, it appeared the restaurants had carried on operating the Bonchon brand as if nothing had changed, according to the lawsuit.

Parent company Bonchon International Inc., and the U.S. arm Bonchon USA Inc and Bonchon Franchise LLC, filed a lawsuit in April, arguing the franchisees had violated trademark laws with unauthorized use of the brand’s name, marks and proprietary information, as well as breach of contract and unfair business practices. The initial complaint also sought $202,852.46 in lost profits and unspecified damages.

A U.S. District Court judge for the Southern District of New York last week agreed to a preliminary injuction, ordering that the restaurants close on Aug. 10 and completely “de-identify” with Bonchon by Aug. 25, including the look of the restaurants and their presence on third-party delivery sites, like Uber Eats and DoorDash.

Neither Ham nor Bonchon officials immediately responded to requests for comment.

Based in South Korea, the fast-casual brand has grown in the U.S. to more than 100 units in the U.S. and nearly 400 units worldwide.

 

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