Bonchon: a Very Profitable Franchise Making $1.6M Turnover

A fairly recent franchise (the first store opened in the US in 2006), Bonchon is one of the fastest growing franchise brand in the US today: it had over 120 restaurants as of 2021.

Fuelled by strong Korean BBQ food market trends and limited competition, Bonchon has become a very popular franchise among franchisees. But the hype isn’t just limited to that.

Indeed, Bonchon is one of the most profitable franchises we found, when we compare the required investment cost to the expected profits. We estimate it takes only 3.5 years to recoup your investment, which is excellent.

Want to hear more? Let’s dive in!

Bonchon franchises: key figures

Franchise fee	$40,000
Royalty fee	5.0%
Marketing fee	5.0%
Investment (mid-point)	$820,000
Average sales	$1,578,000
Sales to investment ratio	1.9x
Payback period*	4 years
Minimum net worth	$1,100,000
Minimum liquid capital	$525,000

What is Bonchon?

Bonchon, meaning “my Hometown” in Korean, is a South Korean international fast-food restaurant headquartered in Dallas, Texas.

The chain was founded in Busan, South Korea, in 2002 by Jinduk Seo. It offers Korean fried chicken, starters, desserts, sides, and sauces.

Bonchon’s franchising journey started in 2006 when its first location in the United States opened at Fort Lee, New Jersey and now has 120 stores in the US

Pros and cons of Bonchon franchises

Pros

• Exclusive territory protection: The franchisor grants its franchisees the right to operate their businesses in a designated area. The franchisor does not license any other franchises or operate competing channels in the protected area.
• Management training: The brand employs a qualified and skilled operations team. Franchisees receive extensive three weeks of training on the brand’s concept and best operations practices for running a successful business. They also get grand opening assistance and ongoing coaching from brand professionals.
• Marketing support: The brand has an an experienced marketing and advertising team. It helps franchisees create brand awareness, and engage and attract customers through integrated national and local store marketing strategies, new products, public relations, and social media.
• Real estate and construction: Bonchon provides its franchisees with experts and guidance on building their restaurants. It offers them criteria for site selection, standard restaurant specifications, building support, and lease negotiation support to help them minimize establishment costs.
• Multiple dining options: The brand offers a variety of dining options for its customers such as traditional sit-downs, sports bars, and quick-service restaurants appealing to families, corporates, and busy professionals alike. Also, these help franchisees boost their incomes.
• Flexible franchise models: The franchisor’s franchise formats can fit any real estate size. Franchisees can utilize the available real estate opportunities in their locations by choosing the best build-out options that suit their needs. These options include the fast-casual model, mall model, and small-court model.
• Franchise support: The brand has an experienced management team and supports its franchisees right from inception and ensures they grow. Franchisees get operational support and growth ideas from the brand’s top leadership and a network of franchise experts who have great success ideas in the industry.

Cons

• No direct financing: The franchisor does not directly or indirectly finance its franchisees for start-up or development expenses.
• Not a passive investment: The franchise does not allow absentee business ownership. Franchisees need to be actively involved in the restaurant’s daily operations.
• Competition: The brand faces some competition from Korean BBQ and other similar chicken BBQ and chicken wings chains like Wingstop, Waba Grill or even L&L Hawaiian Barbecue

How much should you invest for a Bonchon franchise?

You would have to invest $978,914 to open a new Bonchon franchise restaurant on average. This is the investment required for a dine-in restaurant.

Indeed, there 3 kinds of formats of restaurants you can choose from:

• Dine-in Restaurant: $978,914
• Fast Casual Restaurant: $827,170
• Delivery and Carryout only Restaurant: $652,623

The investment amount is an average; indeed, it varies based on many factors, such as the location of your restaurant, its size, etc.

Here’s the full breakdown of costs per restaurant format:

Bonchon startup costs: Dine-in restaurant

Type of cost	Amount
Initial franchise fee	$40,000
Construction and leasehold improvements	$412,500-$590,000
Furniture, and fixtures	$45,283-$66,658
Equipment	$125,000-$193,000
Additional Funds 3 Months	$20,000-$60,000
Other	$127,815-$237,571
Total	$770,598-$1,187,229

Bonchon startup costs: Fast casual restaurant

Type of cost	Amount
Initial franchise fee	$40,000
Construction and leasehold improvements	$329,540-$437,715
Furniture, and fixtures	$35,283-$58,780
Equipment	$125,000-$173,000
Additional Funds 3 Months	$20,000-$60,000
Other	$118,345-$216,676
Total	$668,168-$986,171

Bonchon startup costs: Delivery and carryout restaurant

Type of cost	Amount
Initial franchise fee	$40,000
Construction and leasehold improvements	$165,000-$330,000
Furniture, and fixtures	$18,900
Equipment	$125,000-$173,000
Additional Funds 3 Months	$20,000-$60,000
Other	$114,345-$200,101
Total	$483,245-$822,001

What’s the average turnover of a Bonchon restaurant?

On average, a Bonchon franchise makes $1,578,339 in sales per year.

This is the average sales per traditional store for the 100 of the 111 franchised stores that were open for all of 2021. This is an increase of 13.5% year-on-year vs. 2020 ($1,390,242, 104 units).

How profitable is a Bonchon franchise?

On average, a Bonchon franchise makes $414,202 profits per year. This corresponds to a 26% profit margin (adjusted EBITDA margin).

We calculated this number using the information available in the Franchise Disclosure Document 2022. Unfortunately, Bonchon has not provided detailed information on the cost of goods sold (COGS), and labor costs. Therefore, we used 25% and 29% of sales respectively, as per industry benchmarks.

Profit and loss	Amount	% of sales
Sales	$1,578,339	100%
COGS	($394,585)	25.0%*
Labor	($417,718)	29.0%*
Rent	($154,000)	9.7%
Royalty + marketing fees	($157,834)	10.0%
Adjusted EBITDA	$414,202	~26.0%

Is buying a Bonchon franchise a good investment?

Now, does it mean that you would earn $414,000 in profits each year as the franchisee? Alas no, from adjusted EBITDA we also need to deduct other non-operating expenses like corporate taxes, debt interest and such to get to net profit instead.

We estimate Bonchon franchised-owned restaurant have a 12-15% net profit margin. When compared against the investment of $819,000 we found the payback period is only 3.5 years.

This is an excellent payback period: it means that you would wait on average 3.5 years for the net profits of the business to recoup the initial investment of $819,000. Therefore, Bonchon is definitely a great investment from a financial perspective.

Of course, choosing a franchise shouldn’t be limited to how much profits you can make. Instead, you should also consider the pros and cons as explained earlier, as well as the eligibility criteria.

How does it compare vs. other franchises?