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Photo courtesy of Yonhap News |
[Alpha Biz= Kim Jisun] A recent ruling by the Supreme Court of Korea has determined that margin fees not explicitly stated in franchise contracts can be considered unjust enrichment, triggering significant repercussions in the franchise industry. Following this decision, franchisees are expected to file collective lawsuits against franchisors, while industry representatives warn that the ruling disrupts traditional business practices.
As of January 18, several law firms have begun actively recruiting franchisees for class-action lawsuits. Law firm Choi & Partners is seeking plaintiffs for margin fee refund claims, while Law firm Doa represents Mega MGC Coffee franchisees in similar cases. Law firm YK, which previously represented Korean Pizza Hut franchisees, is handling 17 ongoing refund claims. Brands involved include BHC, Kyochon Chicken, BBQ, Baskin-Robbins, Domino’s Pizza, Papa John’s, Myeongryun Jinsagalbi, and Frank Burger.
The Supreme Court’s judgment, issued on January 15, upheld lower court rulings ordering Korean Pizza Hut to return margin fees collected from franchisees between 2016 and 2022. The Court concluded that there was no explicit or implied agreement for margin fees beyond the fixed royalty rate of 6% of total revenue. The total amount to be refunded by Pizza Hut is estimated at approximately 21.5 billion KRW (around $16 million USD).
The decision is expected to prompt additional lawsuits in other franchise sectors, including chicken, burger, coffee, and supermarket chains. Online communities for small business owners have welcomed the ruling, commenting that “the so-called customary exploitation should finally end.”
Alphabiz Reporter Kim Jisun(stockmk2020@alphabiz.co.kr)
