“To avoid lawsuits for difference in franchise fees, disputes must be minimized by reviewing the franchise agreement.”
Interview with attorney Kim Won-sang of Daeryun Corporate Legal Group Franchise Team Daeryun Law Firm Expects increase in legal demand related to franchise fees, 'Legal advice/financial accounting' Provided by Total Care Recently, it became known that Pizza Hut Korea applied to the court to initiate rehabilitation procedures, making it a hot topic.. 1This crisis at Pizza Hut Korea, a multi-generational franchise, was raised by franchise owners. 'Difference in franchise fee lawsuit'It started with a loss in.The difference in franchise fee is a profit added to the price of the goods provided by the head office to the franchisee., sort of 'distribution margin'It means.The court ruled that it was unfair for the headquarters to unfairly impose the difference in franchise fee without the consent of the franchise owner.. Currently, Pizza Hut Korea is going through the appeal process., If the ruling is finalized, store owners will be subject to 210Hundreds of millions of won must be returned.The impact of this ruling appears to be spreading throughout the franchise industry.. The controversy continues as other franchise owners are also known to be considering related lawsuits..While this industry turmoil is expected to continue for the time being,, Daeryun Corporate Legal Group recently announced that it will strengthen its franchise team and take a preemptive response.. In relation to this, we met and spoke with attorney Kim Won-sang, head of the Rehabilitation and Bankruptcy Center, who has direct experience participating in the Korea Pizza Hut lawsuit..Next is a Q&A with Attorney Kim..Q. The fact that Pizza Hut Korea lost a lawsuit over franchise fees is becoming a hot topic.. What caused this lawsuit to start??A. Store owners who previously operated Pizza Hut as direct stores have opened franchise stores.(chain) While operating the business, the profit was significantly lower than expected, so the balance sheet was reviewed.. As a result, it was discovered that too much franchise money was being paid to the head office, and it appears that legal relief was necessary and a lawsuit was initiated..Q. In this ruling, the court found that the franchise fee was excessively charged and sided with the franchise owners.. What is the court's standard for making this decision??A. The issue in this case is not whether or not to receive the franchise fee difference. 'Is there a basis in the franchise agreement for receiving the difference in franchise fee?'am. however 1Sim and 2The trial court ruled that there was no basis for this..especially 2Regarding the reason for revising the Franchise Business Act related to franchise fee difference, the trial court said that it was to clarify that if there is a franchise fee differential, the related agreements must be entered in the contract..However, in this case, the franchise agreement and information disclosure document did not explicitly stipulate the difference in franchise fee.. Meanwhile, in a similar case, the Supreme Court ruled that even if information unfavorable to the franchise owner was included in the information disclosure statement and was provided to the franchise owner before signing the contract, it cannot be considered incorporated into the franchise contract..move on 2The ruling ruled that if the head office needs to compensate for the costs incurred in supplying raw and subsidiary materials, it needs to take steps to establish a basis, such as concluding a contract that reflects this or presenting cost calculation data to franchise owners to obtain consent..Q. It appears that the issue of difference in franchise fees between headquarters and franchise owners has been a common practice.. So it seems like the impact of this lawsuit will be significant., What do you think about the news that other franchise owners are also preparing a group lawsuit??A. In relation to the difference in franchise fee, the matters stated in the information disclosure statement are insufficient or cannot be considered to be incorporated into the franchise contract by themselves., Due to previous practice, it is highly likely that the contract concluded between the head office and the franchise owner will not have detailed provisions on the difference in franchise fee., Considering that franchise owners tend to switch from running directly managed stores and have detailed information on profits and expenses, it is expected that franchise owners will be able to receive sufficient compensation through a group lawsuit..Q. On the other hand, some franchise companies responded with embarrassment.. There are also concerns that we may be caught up in a class action lawsuit., How does headquarters need to respond??A. First of all, franchise headquarters should not enter into poor contracts with franchisees.. Calculation details for cost reduction or preservation must be explained to store owners in an easy-to-understand manner and then clearly stated in the franchise agreement to minimize the possibility of disputes..In addition, detailed conversations held with store owners at the time of signing the contract, It seems necessary to collect receipts and tax invoices that can reveal the circumstances under which the franchise fee was received and claim that the difference in franchise fee was included..Q. So, conversely, what are the things that franchise owners should pay close attention to when signing a contract with the head office??A. What contract terms did franchise owners hear from headquarters when signing a contract?, Have you been specifically introduced to the information stated in the information disclosure statement?, It is important to check whether the specific details were explained in the process of paying the franchise fee.. Therefore, the information disclosure statement, If you have a franchise agreement and a statement of franchise fees received from the head office, you will need that statement..The head office has a professional understanding of the business and possesses sufficient important information.. Also, since this is a group of experts who are proficient in finance and accounting, it is recommended that store owners seek help from experts such as lawyers.. Are there any violations of related laws and regulations regarding the franchise business?, What are the basic regulations that can guarantee profits for franchise owners?, A detailed review of the franchise agreement is necessary to minimize disputes that may arise in the business, including the extent of predictable costs to be borne..Q. As franchise owners and franchise headquarters are very interested in unfair practices, legal demand is expected to increase.. In line with this, Daeryun also strengthened the franchise team within the corporate legal group., What specific preparations are you making??A. This lawsuit began with franchise owners carefully examining their financial statements.. Considering this, the Daeryun Franchise Team provides franchise contracts to franchise companies based on the expertise it has accumulated through consulting on various corporate accounting, finances, and taxes., Provides legal analysis of information disclosure statements. In addition, we provide consulting on the financial structure of franchise owners..Q. In this dispute, what legal improvements do you think are needed to balance the responsibilities of the headquarters and protect the rights of franchisees??A. Franchise business is a business that anyone can easily start, so it has the characteristic of being independent of the type of industry.. Therefore, I think it is necessary for authorities to quickly improve regulations in line with the development of related industries..Q. Lastly, is there anything you would like to say to those who are experiencing franchise-related lawsuits or disputes??A. Legal litigation may seem far away, but when you become a party to a dispute, you are bound to be involved in the dispute for a long time, which has a huge impact on your daily life.. Daeryun is a total care system that provides not only legal advice but also financial and accounting advice, and can provide sufficient help to both franchise owners and headquarters..In particular, in the case of franchise owners, a quick solution is needed because it is a problem that directly affects their livelihood and money.. Daeryun has the expertise to come up with an effective solution one step ahead of a dispute before it escalates, so please contact us to diagnose the problem.. [View full article]
Tax Ilbo - “To avoid lawsuits for difference in franchise fees…disputes must be minimized by reviewing the franchise agreement” (Shortcut)
Segye Ilbo - How to avoid lawsuits for difference in franchise fees... “Disputes must be minimized by reviewing the franchise agreement” (Shortcut)