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Return of Franchise Fees
Return of Franchise FeesWon the Case

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

The Anyang law firm assisted a client who had been defrauded in a franchise agreement by a franchise operator and pursued a franchise fee recovery action. As a result, the client succeeded in recovering the franchise fee along with the cost of materials, startup costs, and the like.

1. Anyang Law Firm, the Reason for the Client's Visit

The client wished to pursue a franchise fee recovery action, stating that he had been defrauded in a franchise agreement.

The Client's Account Heard by the Anyang Law Firm

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.

☞ [Legal Information]: Learn About Points to Note When Entering Into a Franchise Agreement

Statutes on the Franchise Business Act Explained by the Anyang Law Firm

A franchisor has a duty to provide a prospective franchisee with a disclosure document and a document on the status of nearby franchise outlets.

If it does not provide these, it cannot receive a franchise fee from a prospective franchisee or enter into a franchise agreement with a prospective franchisee.

▣ 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

2. Anyang Law Firm, Assistance for the Client's Successful Recovery of the Franchise Fee

The Anyang law firm closely analyzed the relevant statutes in order to recover the franchise fee the client had paid to the defendant, and then provided assistance as follows.

Anyang Law Firm's Assistance (1): The Defendant Breached the Duty to Deposit the Franchise Fee

Under the Fair Transactions in Franchise Business Act, a franchisor cannot directly receive a franchise fee from a franchisee unless it has subscribed to franchisee damage compensation insurance. (Fair Transactions in Franchise Business Act Article 6-5(1))

However, the defendant, in accordance with the agreement in this case, demanded that the franchise fee be transferred to an account designated by the defendant, and the client paid it.

Accordingly, the firm argued that the defendant had violated the Fair Transactions in Franchise Business Act in that the defendant had not subscribed to franchisee damage compensation insurance.

Assistance From the Anyang Law Firm ② The Defendant Provided False and Exaggerated Information

When the defendant encouraged the client to open a franchise store, the defendant stated that it was generating substantial sales through its own unique manufacturing method.

In reality, however, the ingredients and sauce used to make the pizza were merely products sold on the open market, and the sales figures also had no specific basis. The attorney argued these points.

▣ 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

3. Anyang Law Firm Succeeds in Recovering the Client's Franchise Fee

As a result of the Anyang law firm's assistance, the client was able to recover the down payment paid at the time of the franchise contract, along with various kitchen items and material costs needed to open the store.

The Daeryun Corporate Legal Group operates a franchise practice area and assists clients who are experiencing difficulties due to conflicts with franchise store owners.

In this regard, the Daeryun Anyang law firm, composed of attorneys with extensive experience in resolved cases and knowledge across various fields, will provide the client with the most suitable solution.

☞ [Practice Area]: Go to the Daeryun Corporate Legal Group Franchise Practice Area

안양법무법인 조력 사레 | 프렌차이즈 의뢰인 소송 조력한 안양법무법인, 가맹금 반환에 성공

This content is based on actual cases handled by Daeryun Law LLC and has been partially adapted. All copyrights belong to Daeryun Law LLC.
Unauthorized reproduction, copying or distribution may result in legal action under applicable laws.

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