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Return of franchise fees, etc.
Return of franchise fees, etc.Winning the case (favorable judgment)

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

The client who came to a franchise specialist attorney, having decided to claim a refund of the franchise fee due to the headquarters' breach of contract, came to an attorney with expertise in franchise law to receive legal assistance.

1. A Client Who Came to the Franchise Specialist Attorney

Daeryun Franchise Attorney Franchise Fee Refund Lawsuit Assistance

The client who came to the franchise attorney requested assistance to claim a refund of the franchise fee from the franchise headquarters, and with the assistance of an attorney experienced in franchise law, the full amount claimed was granted.

A Client Who Requested a Consultation Regarding Franchise Law

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.

2. The Fair Transactions in Franchise Business Act Explained by the Franchise Specialist Attorney

Daeryun franchise attorney Fair Transactions in Franchise Business Act consultation trial defense

The client who came to the franchise attorney sought to pursue a 🔗franchise lawsuit to terminate the franchise agreement and claim a refund of the franchise fee.

A franchise business, commonly also called a franchise, refers to an arrangement in which the franchisor allows the use of its trademark, trade name, signage, and the like, and has the franchisee sell according to certain standards.

However, having a trademark alone does not mean that everything is recognized as a franchise business; certain conditions must be met under franchise law.

Conditions of a franchise business


▶ The franchisor permits the franchisee to use the business mark

▶ The franchisee sells goods or services according to certain quality standards or business methods

▶ The franchisor provides support, education, and control regarding management and business activities

▶ A franchise fee is paid in return for the use of the business mark and for support and education regarding management activities

▶ A continuous transactional relationship

What Are the Requirements for Refund of Franchise Fees Under the Fair Transactions in Franchise Business Act?

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

① Entering into a franchise agreement or receiving a franchise fee without having provided a lawful disclosure document

② Providing the franchisee with information that differs from the facts or that exaggerates the facts

③ Where false or exaggerated information or omitted content provided to the franchisee is found to have had a material effect on the conclusion of the contract

④ Where the franchisor unilaterally suspends the franchise business without justifiable grounds

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.

3. The Franchise Specialist Attorney's Assistance

The franchise specialist attorney reviewed the client's franchise agreement closely and built the pleading on the basis of the related franchise law principles.

Violation of the Duty to Deposit Franchise Fees

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.

False and Exaggerated Advertising

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.

A Lawful Claim for Refund of Franchise Fees

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.

Violation of the Duty to Provide the Disclosure Statement

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.

4. Result of the Franchise Specialist Attorney's Assistance: “Full Amount Granted”

Daeryun franchise specialist attorney full granting of claimed amount assistance

The court, accepting the arguments of the franchise specialist attorney, issued a decision ordering payment of the full amount claimed by the client.

If You Need a Consultation on the Fair Transactions in Franchise Business Act

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.

프랜차이즈변호사

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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Attorney DongIl PARK

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