The end of the ‘implied agreement’… Franchise-for-difference ruling that shook the franchise industry [Daeryun’s Biz law forum]
Seoul High Court, 'Korean Pizza Hut' Case ruling reveals structural transparency issues in the franchise industry"headquarters, Establishing trust-based management should be a priority" The Seoul High Court is so-called 'Korean Pizza Hut incident'(2022me2024467)The franchise headquarters ordered the return of the difference in franchise fees collected from franchisees, claiming that it was unfair profit.. It is evaluated as a decision that goes beyond a simple financial dispute and directly exposes the problem of structural transparency in the franchise industry.. Starting from this ruling, franchisors must prioritize legal risk management and the establishment of a trust-based management system rather than short-term profits.. "There was a customary agreement" The difference in franchise fee, which blocks the source of logic, is the amount taken by the franchisor in excess of the wholesale price when supplying raw and subsidiary materials., That means delivery margin.. Originally, the franchisor could designate a specific supplier to the franchise for reasons of unifying quality and improving logistics efficiency., If margin is acquired during this process, it is legally considered a type of franchise fee..This is already specifically defined in the Enforcement Decree of the Franchise Business Act.. In the information disclosure statement, it is also a regulation to specify the ratio of the average difference in franchise money per franchise to sales.. However, in this ruling, the court "The difference in franchise fee is not a simple distribution margin, but a franchise fee that requires contractual agreement."He drew a clear line, saying. There are no relevant provisions in the franchise agreement., If the franchisee did not know of its existence, it would be clear unfair profit.. For a long time, the franchisor included the difference in franchise fee in the price of raw and subsidiary materials.. However, the court's judgment is that if there is no clause or individual agreement to justify this, it is unfair enrichment.. The court's ruling "A contractual agreement is not established solely through the disclosure of information."This section has great significance to the industry as a whole.."There was an implied agreement in long-standing trading practices."This is because it fundamentally blocks the logic of the franchise headquarters.. Collecting the franchise fee difference without the franchisee's clear knowledge or consent is no longer a practice but has become a violation of the law.. Even if the name is changed due to transportation costs, management costs, etc., if proof is lacking, it is considered the difference in franchise fee.. This ruling sends a structural warning to the franchise industry.. The key points that franchisors should keep in mind regarding franchise difference are as follows:.① Strengthening the obligation to specify in the franchise agreement : 2024year 7month 3The revised Franchise Business Act includes essential information in the contract. 'Supply price calculation method'includes. This means going beyond simple price disclosure and clearly presenting the margin structure and calculation basis.. If this is not recorded or handled opaquely, there is a high possibility that it will lead to an unfair enrichment lawsuit..② Exemption is not possible through information disclosure alone. : Registration of information disclosure statement is merely an administrative procedure.. the court 'Provision of an information disclosure statement does not imply consent from the franchisee.'I decided. If there is a discrepancy between the information disclosure statement and the contract, the court will give priority to the franchisor's liability..③ Non-recognition of customary/implied consent : Considering the franchisee's weak bargaining power, the court ruled that the franchisee's 'implied agreement' do not accept the claim. In order for the franchisor to maintain a legal structure, prior notice, written consent, and price disclosure are required. 3You must go through the steps. Franchise headquarters, than short-term profits 'faith' If the ruling is confirmed by the Supreme Court, it will have a significant impact on all future sales, accounting, and legal departments of franchise headquarters.. Practical countermeasures to reduce risk are as follows:.① Complete reexamination of supply contracts : Delivery contract structure with partner companies, Logistics cost calculation method, Margin rates must be transparently redesigned. Unclear contracts can serve as unfavorable evidence in future lawsuits..② Ensure consistency between contract and information disclosure statement : If the figures or expressions between the two documents are different, the court 'deliberate concealment'can be regarded as.③ Clarification of accounting structure : Separate accounting codes for each item such as logistics costs, management costs, and commissions. 'Bulk processing of supply prices' The practice must be eliminated.④ Institutionalization of franchise prior consent procedures : Supply price and margin basis must be documented and signed or electronic consent obtained from franchisees.⑤ Regular update of information disclosure statement : Information disclosure statements that differ from actual operations may be considered false information, so renewal is required every year.. This ruling is not limited to one brand, Pizza Hut Korea.. eating out, beauty, education, This is because most franchise industries, including services, have the same franchise structure.. In particular, franchisors make profits through delivery margins instead of franchise fees. 'Logistics-centric model'If you are running , you could take a direct hit..It is highly likely that the Fair Trade Commission's investigation standards will be strengthened.. If the difference in franchise fee is not specified in the contract or notified to the franchisee,, This means that it is not just a civil matter, but can also be grounds for administrative sanctions and fines..The essence of the franchise industry is not expansion, but 'faith'all. Franchisees disclose their profit structure transparently and, Only when trust with franchisees is restored will the foundation for sustainable growth be laid.. In that sense 'difference in franchise fee'is not just a financial item, but has become a barometer of legal risk and an indicator of brand reputation.. Designing a structure of trust before a structure of profit, That is the only way for the franchise industry to survive in the future.. [View full article]
The end of the ‘implied agreement’… Franchise-for-difference ruling that shook the franchise industry [Daeryun's Biz law forum] (Shortcut)