Franchise Specialist Attorney Assistance Case | Full Amount of the Franchise Fee Refund Claim Granted

The course of the case as identified by the franchise attorney is as follows.

When a restaurant where the client had been a regular customer for years announced that it would run a franchise business, the client decided to become self-employed and entered into a franchise contract.

At the time, he paid 7 million won in the name of a trademark usage fee and training costs, but in fact received no training at all on matters such as recipes and how to prepare ingredients.

Later, while operating the store, he found the head office's method of operation strange, and upon looking into it, he learned that the head office had been violating the relevant law.

The client, who was taken aback by this, decided to terminate the franchise contract and claim the return of the franchise fee, and came to a franchise law specialist attorney to obtain legal assistance.

According to the Fair Transactions in Franchise Business Act, where certain statutes are violated, the head office incurs an obligation to refund the franchise fee to the franchisee.

Grounds for refund of the franchise fee

If a franchisee demands a refund of the franchise fee from the head office on the grounds above, the franchise fee must legally be refunded within one month.

In this case, a certain period and requirements are set, so caution is needed.

When entering into the franchise agreement, the other party had received a remittance of 7 million won in the name of training fees and trademark usage fees.

However, under the Fair Transactions in Franchise Business Act, a franchisor cannot directly receive franchise fees and, except in exceptional cases, must deposit them with a separate escrow institution.

The franchise law attorney emphasized that the other party had not complied with these relevant statutes at all.

The client's franchise agreement stated that the franchisor 'provides original service, management methods, and recipes.'

In reality, there were no dishes at all based on a proprietary recipe or developed technology, and in many cases the raw ingredients were ready-made products with only the labels changed.

The franchise law attorney emphasized that the head office had engaged in false or exaggerated advertising and therefore violated the Fair Transactions in Franchise Business Act.

Under the Fair Transactions in Franchise Business Act, if a franchisor violates a major statute such as Article 7 (3) of the Fair Transactions in Franchise Business Act, the franchisor must refund the franchise fee within one month of the franchisee's request for a refund.

Although the client lawfully requested a refund of the franchise fee accordingly, the other party was not performing this.

The franchise law attorney emphasized that the other party was failing to honor a lawful claim for a refund of the franchise fee without any legal basis.

According to Article 7, Paragraph 1 of the Fair Transactions in Franchise Business Act, the franchisor has an obligation to provide a disclosure document in advance when concluding a franchise agreement.

However, the franchisor had not provided the disclosure document even after the conclusion of the contract.

The franchise law attorney emphasized that, because the other party had clearly violated the statutes related to the provision of the disclosure document, the franchise fee should be refunded.

This was a case in which a client who sought to claim a refund of the franchise fee due to an unfair franchise agreement had the full amount of the claim granted with the assistance of an attorney.

In this way, disputes concerning franchise agreements under franchise law require careful review of the terms of the agreement based on expertise in the relevant laws.

At Law Firm Daeryun, franchise attorneys with extensive experience in franchise law, franchise business, and other fair trade fields accurately assess the client's situation and provide assistance tailored to it.

If you have a similar concern, you may obtain assistance regarding franchise law at any time through the 🔗legal consultation booking.