This article is based on its most recent FDD.
Bonchon franchise is a fast-casual service restaurant that specializes in Korean-style fried chicken and a variety of savory Asian fusion dishes. It’s known for its signature fried chicken and prepared by using a double-frying method that was concocted by its founder Jinduk Seh. Formally known as Bonchon Restaurant Company, it was formed in Korea in November 2002 and incorporated in Korea in June 2009, when its name changed to Bonchon Inc.
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Bonchon's history
Bonchon U.S.A., Inc. was organized in June 2011 and the principal business address is in Dallas Texas. The CEO is Flynn Dekker and has held this title since May 2019. Before Bonchon, Mr. Dekker served as the Chief Marketing Officer of Wingstop Inc. from 2014 to 2019 in Dallas, Texas.
Bonchon competes with popular fast-food chains like KFC, but Bonchon has a higher price point than KFC with an average check of around $31 a person but can include two people on the ticket. Bonchon appeals to families and friends who come together to enjoy the atmosphere and can also enjoy alcohol with their meal.
How Much is a Bonchon Franchise?
Bonchon Franchise Fee
The initial license fee for a Bonchon franchise is $40,000. This is the upfront fee that must be paid when opening a Bonchon franchise. However, the more businesses you develop the cheaper the initial fee is for each business as outlined below.
1-2 Businesses: $40,000
3-5 Businesses: $35,000
6-10 Businesses: $30,000
11 or more Businesses: $25,000
Incentive Program
If a Franchise Agreement is signed by you and Bonchon in 2021 and the associated Restaurant opens in 2021, then for that Restaurant we will reduce:
(i) the Initial Franchise Fee to $20,000
(ii) the Continuing Royalty rate to 2.0% for the first 12 months of operations and to 3.0% for the second 12 months of operations, after which the continuing Royalty rate will be 4.75%.
Bonchon is an international brand with more than 370 locations in 8 different countries. In the United States Bonchon had 104 franchised restaurants in 2020.
Bonchon Franchise Cost
The estimated total investment necessary to begin operation of a Bonchon franchise ranges from $520,494 to $1,122,419 (excluding real property).
Additional Cost Breakdown
Additional Cost Breakdown
| Pre-Opening Training Expenses | $6,500 – $15,000 |
| Construction and Leasehold Improvements | $250,000 – $550,000 |
| Equipment | $49,000 – $120,000 |
| Furniture & Fixtures | $15,000 – $40,000 |
| Hand Wares and Small Appliances | $6,000 – $13,000 |
| Computer and Point of Sale System and Other Technology | $15,000 – $25,000 |
| Inventory to begin operating | $32,754 – $35,754 |
| Rent Deposit | $23,625 – $56,250 |
| Security Deposits and other Pre-Paid Expenses | $14,000 – $16,000 |
| Professional Fees | $4,500 – $6,000 |
| Signs | $7,000 – $20,000 |
| Architect and Engineering Fees | $9,000 – $40,000 |
| Opening Advertising | $ 5,000 – $10,000 |
| Pre-Opening Labor | $9,615 – $20,415 |
| Additional funds (First 3 months) | $30,000 – $90,000 |
| Total | $520,494 – $1,122,419 |
The total represented above excludes real property costs and the total investment necessary to begin operation as a franchisee under an Area Development Agreement is from $62,000 to $135,000 (assuming, for the low end of the range, you agree to develop 3 Businesses and, for the high end of the range, you agree to develop 10 Businesses, although this is not a maximum.
Ongoing Costs and Fees
The royalty fee for Bonchon Franchise is 3.75% of previous week’s Gross Revenue for the first 12 months of operations then 4.75% after 12 months or for the rest of the initial term. There is also a system brand fund contribution: That is up to 4% of Gross Revenues but currently is 1% of gross revenues.
Bonchon Franchisor Cash Flow Statement
Bonchon Franchisor Cash Flow Statement (Years Ended December 31, 2020, 2019, 2018)
| 2020 | 2019 | 2018 | |
|---|---|---|---|
| Cash flows from operating activities: | |||
| Net Income | $ 1,739,845 | $ 799,435 | $ 2,257,185 |
| Adjustment to reconcile net income to net cash provided by operating activities: | |||
| Depreciation | $ 29,371 | $ 6,346 | $ 6,562 |
| Changes in assets and liabilities: | |||
| Accounts receivable | $ (187,246) | $ (89,045) | $ (3,015) |
| Due from Parent | $ (408,220) | $ 285,206 | $ 4,214 |
| Due from related party | $ 391,028 | $ (391,028) | – |
| Prepaid expenses and other current assets | $ 41,043 | $ (36,424) | $ 27,400 |
| Security deposits | $ (14,020) | $ (82,333) | – |
| Accounts payable and accrued expenses | $ 143,908 | $ 586,831 | $ 87,268 |
| Due to related parties | $ 78,044 | $ (1,554) | $ 1,572 |
| Funds designated for franchisee advertising | $ (575,034) | $ (103,033) | $ 306,851 |
| Deferred revenues | $ (611,502) | $ (73,540) | $ (760,000) |
| Deferred rent liability | $ 49,744 | – | – |
| Net cash provided by operating activities | $ 676,961 | $ 900,861 | $ 1,928,037 |
| Cash used in investing activity: | |||
| Purchases of property and equipment | $ (1,025,193) | $ (579,591) | $ (8,717) |
| Cash flows from financing activities: | |||
| Member distributions | $ (380,000) | – | $ (1,331,942) |
| Member contributions | $ 800,000 | $ 951,455 | – |
| Net cash provided by (used in) financing activities | $ 420,000 | $ 951,455 | $ (1,331,942) |
| Net increase in cash | $ 71,768 | $ 1,272,725 | $ 587,378 |
| Cash – beginning | $ 2,614,416 | $ 1,341,691 | $ 754,313 |
| CASH – ENDING | $ 2,686,184 | $ 2,614,416 | $ 1,341,691 |
How Much Do Franchise Owners Make?
Bonchon Franchise Sales Figures
| Calendar Year | Median Gross Revenue | Average Gross Revenues |
|---|---|---|
| 2019 | $1,192,142.76 | $1,308,216.85 |
| 2020 | $1,269,802.16 | $1,390,242.79 |
The table above contains financial performance information from “Mature Franchised Restaurants” aka franchised Bonchon Restaurants that were open and operating for a full twelve (12) month period during the 2019 and 2020 calendar years.
Although there were a total of 98 and 104 franchised Bonchon Restaurants operating in 2019 and 2020, respectively, 78 and 67 franchised Bonchon Restaurants qualified as Mature Franchised Restaurants during such reporting years and were included in the table.
In 2019 43% met or exceeded the 2019 yearly average Gross Revenues, with the highest Gross Revenues earned being $3,180,142 and the lowest Gross Revenues earned being $339,027.
In 2020 42% met or exceeded the 2020 yearly average Gross Revenues, with the highest Gross Revenues earned being $2,938,025 and the lowest Gross Revenues earned being $450,053.
Bonchon Franchisor Income Statement
Bonchon Franchise Income Statements (Years Ended December 31, 2020, 2019, 2018)
| 2020 | 2019 | 2018 | |
|---|---|---|---|
| Revenue | |||
| Branchise fees and royalties | $ 6,291,381 | $ 5,195,181 | $ 4,785,355 |
| Franchisee advertising fees | $ 1,634,784 | $ 1,54,223 | $ 597,453 |
| Total revenues | $ 7,926,129 | $ 6,349,404 | $ 5,382,808 |
| Selling, general and administrative expenses | $ 6,186,284 | $ 5,549,969 | $ 3,125,623 |
| Net income | $ 1,739,845 | $ 799,435 | $ 2,257,185 |
| Member’s deficit – beginning | $ (615,535) | $ (780,843) | $ (1,706,086) |
| Cumulative effect of change in accounting principle | – | $ (1,585,582) | – |
| Member contributions | $ 800,000 | $ 951,455 | – |
| Member distributions | $ (380,000) | – | $ (1,331,942) |
| MEMBERS EQUITY (DEFICIT) – ENDING | $ 1,544,310 | $ (615,535) | $ (780,843) |
Bonchon Franchisor Income Statement Key Insights
Overall, Bonchon is a profitable business, with a net income of $1.74 million in 2020. The highest revenue stream is from franchise fees and royalties which accounts for over $6.2 million. Bonchon has seen a total revenue growth increase on average of 21% since 2018.
Expenses have risen as the company continues to add new franchises each year with expenses totaling 6.1 million in 2020.
Another promising sign is in 2020 members of the business invested $800,000 while only taking $380,000 in distributions from the bottom line.
Cash Flow Statement Key Insights
In 2020, Bonchon’s net income was $1.74 million, but their cash and cash equivalents were almost $ 2.7 million at the end of 2020 which was about the same as the start of 2020. Bonchon used about $1 million in investing in property and equipment, an increase of almost 100% in investing activities from the year before indicating their mission of expanding their overall business reach.
In 2020, Bonchon’s net income was $1.74 million, but their cash and cash equivalents were almost $ 2.7 million at the end of 2020 which was about the same as the start of 2020. Bonchon used about $1 million in investing in property and equipment, an increase of almost 100% in investing activities from the year before indicating their mission of expanding their overall business reach.
How many Bonchon units have opened/closed?
Bonchon Franchise Locations
| 2020 | 2019 | 2018 | |
|---|---|---|---|
| Franchises sold | 20 | 14 | 11 |
| Franchises terminated | 4 | 2 | 7 |
| Franchises purchased | – | – | – |
| Franchised outlets in operations | 104 | 98 | 84 |
| Corporate-owned outlets in operation | 3 | 3 | 3 |
The number of Bonchon locations has been growing over the past three years. In 2018 there were 84 franchise outlets in operation, while in 2019 it increased to 98, and by 2020 there now is 104. With Bonchon’s 2021 incentive program that provides significant discounts in initial fees and royalty payments, they should expect more growth in franchises in operation.
Conclusion
Bonchon is a fast-casual service restaurant that uses its international presence and almost 20 years of experience in the Korean Food industry to provide customers a great experience. Bonchon is currently in a competitive field in the fried chicken industry but uses its higher price point and unique cuisine to its advantage by attracting a different market of people that may like some variety instead of fast food chains like Chick Fil A, KFC, or other chains in the Chicken Industry. We strongly recommend you speak to at least 5 Bonchon franchisees to better understand the financials (see questions to ask).
Think Bonchon is the right franchise for you, or are you interested in other franchise opportunities in the food and beverage industry? Check out our listings page on the Vetted Biz website for thousands of franchises available for your investment.
