Anyang Law Firm Assistance Case | Anyang Law Firm Assists Franchise Client in Litigation and Succeeds in Recovering the Franchise Fee

The client was urged by the defendant to open a pizza shop franchise, and trusting the defendant, the client paid a franchise fee of 7 million won and entered into a franchise agreement.

However, the defendant did not teach the client the pizza ingredients, the method of blending the sauce, and the like.

Believing that the defendant would teach this in due course, the client remitted to the defendant the shop rent and the cost of all the supplies and equipment needed to operate the franchise.

The client, who had merely received and used finished sauce and ingredients from the defendant, consulted an acquaintance who was operating a pizza shop franchise about his situation.

Through this, the client learned that the sauce and ingredients supplied by the defendant were nothing more than products sold on the market with their stickers removed and replaced with stickers bearing the defendant's trade name.

On top of this, the client also learned that the defendant had not even registered as a franchisor.

The client then immediately contacted the defendant and sent a certified mail stating that, because this was a breach of the franchise agreement, the client was terminating the agreement.

However, the defendant gave no clear answer, and the client sent a certified mail requesting the return of the franchise fee that had been paid, but again received no response, and so requested Daeryun's assistance.

▣ Fair Transactions in Franchise Business Act Article 7 (Duty to Provide a Disclosure Document, etc.)

If a franchisor has not provided the registered disclosure document and the document on the status of nearby franchise outlets, or where 14 days have not passed since the date on which the disclosure document, etc. was provided, the franchisor shall not engage in any of the following acts.

1. Receiving a franchise fee from a prospective franchisee

2. Entering into a franchise agreement with a prospective franchisee

▣ Fair Transactions in Franchise Business Act Article 10 (Return of the Franchise Fee)

In any of the following cases, a franchisor shall return the franchise fee within one month from the date on which a prospective franchisee or franchisee requests it in a written document stating the matters prescribed by Presidential Decree.

1. If the franchisor has breached the duty to provide a disclosure document

2. If false or exaggerated information or the omission of an important matter is found to have had a material effect on the conclusion of the agreement

▣ Fair Transactions in Franchise Business Act, Article 9 (Prohibition of Provision of False or Exaggerated Information, etc.)

When providing information to a prospective franchisee or a franchisee, a franchisor shall not engage in any of the following acts.

1. Providing information that differs from the facts, or providing information by inflating the facts

2. Providing information by concealing or downplaying facts that have a material effect on the conclusion or maintenance of the contract