Hello, I'm Lawyer Choi Jihyun.
Today, I'd like to introduce a case where a franchisee terminated an illegal franchise agreement and received a full refund of the franchise fee from the franchisor without litigation.
1. Situation Faced by Clients
The clients were contemplating a new business venture in the beauty industry while already engaged in the field. During this deliberation, they came across a franchise headquarters offering to share all their expertise, including attracting customers, and even promising sales exceeding the projected revenue.
Consequently, the clients entered into a franchise agreement with unilateral and disadvantageous terms, agreeing to pay a franchise fee amounting to tens of millions of won along with monthly royalties of 15% of the total sales of the franchise.
After the franchise agreement was signed and the franchise fee was paid, the franchise headquarters failed to fulfill its obligations of actively connecting customers, as stipulated in the contract. Furthermore, they did not comply with other contractual obligations, such as marketing and cooperation.
To make matters worse, the franchise headquarters, in a somewhat cavalier manner, notified the franchisees of contract termination without returning the franchise fee, let alone considering compensation, creating a rather perplexing situation.
Lawyer Choi Jihyun, in line with the robust protection afforded to franchisees under our franchise law, took notice of the numerous obligations violated by the franchise headquarters in this franchise agreement and initiated negotiations to resolve the matter.
2. Active Advocacy by Lawyer Choi Jihyun
Firstly, Lawyer Choi Jihyun pointed out that the unilateral termination of the franchise agreement by the franchise headquarters itself was illegal.
According to Article 14 of the Franchise Business Act, if the franchise headquarters intends to terminate the franchise agreement, it must provide the franchisee with a grace period of more than two months, notify them of the specific violations of the contract, and inform them that the contract will be terminated if the violations are not rectified. This notification must be provided in writing at least twice. In other words, Lawyer Choi emphasized that the notification of contract termination, lacking compliance with such legal obligations, does not hold legal validity.
Furthermore, the clients, until the unilateral termination notice by the franchise headquarters, diligently fulfilled their obligations under the franchise agreement, while the franchise headquarters failed to comply with the contractual obligations regarding active customer connections and the supply of goods/services, as specified in the contract.
Additionally, Lawyer Choi Jihyun aggressively attacked the franchise headquarters on various grounds related to the franchise agreement, such as violation of the obligation to provide disclosure documents under Article 6-2 of the Franchise Business Act, violation of the obligation to deposit franchise fees under Article 6-5 of the Franchise Business Act, and violation of the obligations of the franchise headquarters under Article 12 of the Franchise Business Act.
3. Outcome
The outcome was a resounding success.
The clients were able to retrieve the entire franchise fee from the franchise headquarters without having to go through litigation. Additionally, they obtained a prohibition on the franchise headquarters from using the clients' intellectual property, which had been utilized as marketing materials.
Our law firm continues to provide the most effective solutions to many individuals facing difficulties at this very moment. We are committed to offering clear and decisive solutions based on our solid expertise.
Innovative Firm for Innovative Minds,
Law firm Sayou
Assigned lawyer: Choi Ji-hyun
Law firm Sayou
Seocho-gu, Gangnam-daero 210, Hangbok Building, 9th Floor
Consultation Phone: 02-6959-4662
Hello, I'm Lawyer Choi Jihyun.
Today, I'd like to introduce a case where a franchisee terminated an illegal franchise agreement and received a full refund of the franchise fee from the franchisor without litigation.
1. Situation Faced by Clients
The clients were contemplating a new business venture in the beauty industry while already engaged in the field. During this deliberation, they came across a franchise headquarters offering to share all their expertise, including attracting customers, and even promising sales exceeding the projected revenue.
Consequently, the clients entered into a franchise agreement with unilateral and disadvantageous terms, agreeing to pay a franchise fee amounting to tens of millions of won along with monthly royalties of 15% of the total sales of the franchise.
After the franchise agreement was signed and the franchise fee was paid, the franchise headquarters failed to fulfill its obligations of actively connecting customers, as stipulated in the contract. Furthermore, they did not comply with other contractual obligations, such as marketing and cooperation.
To make matters worse, the franchise headquarters, in a somewhat cavalier manner, notified the franchisees of contract termination without returning the franchise fee, let alone considering compensation, creating a rather perplexing situation.
Lawyer Choi Jihyun, in line with the robust protection afforded to franchisees under our franchise law, took notice of the numerous obligations violated by the franchise headquarters in this franchise agreement and initiated negotiations to resolve the matter.
2. Active Advocacy by Lawyer Choi Jihyun
Firstly, Lawyer Choi Jihyun pointed out that the unilateral termination of the franchise agreement by the franchise headquarters itself was illegal.
According to Article 14 of the Franchise Business Act, if the franchise headquarters intends to terminate the franchise agreement, it must provide the franchisee with a grace period of more than two months, notify them of the specific violations of the contract, and inform them that the contract will be terminated if the violations are not rectified. This notification must be provided in writing at least twice. In other words, Lawyer Choi emphasized that the notification of contract termination, lacking compliance with such legal obligations, does not hold legal validity.
Furthermore, the clients, until the unilateral termination notice by the franchise headquarters, diligently fulfilled their obligations under the franchise agreement, while the franchise headquarters failed to comply with the contractual obligations regarding active customer connections and the supply of goods/services, as specified in the contract.
Additionally, Lawyer Choi Jihyun aggressively attacked the franchise headquarters on various grounds related to the franchise agreement, such as violation of the obligation to provide disclosure documents under Article 6-2 of the Franchise Business Act, violation of the obligation to deposit franchise fees under Article 6-5 of the Franchise Business Act, and violation of the obligations of the franchise headquarters under Article 12 of the Franchise Business Act.
3. Outcome
The outcome was a resounding success.
The clients were able to retrieve the entire franchise fee from the franchise headquarters without having to go through litigation. Additionally, they obtained a prohibition on the franchise headquarters from using the clients' intellectual property, which had been utilized as marketing materials.
Our law firm continues to provide the most effective solutions to many individuals facing difficulties at this very moment. We are committed to offering clear and decisive solutions based on our solid expertise.
Innovative Firm for Innovative Minds,
Law firm Sayou
Assigned lawyer: Choi Ji-hyun
Law firm Sayou
Seocho-gu, Gangnam-daero 210, Hangbok Building, 9th Floor
Consultation Phone: 02-6959-4662