After the Supreme Court ordered the Korea Pizza Hut headquarters to return 21.5 billion won in differential franchise fees, disputes have been spreading across the entire franchise industry. As of February 20, it is understood that more than 14 brands have either been sued over the return of differential franchise fees or are in the process of related legal proceedings.
Group lawsuits by franchisees are being filed one after another against brands that have logistics margin structures similar to Pizza Hut. These include BHC, BBQ, Burger King, Baskin-Robbins, Twosome Place, Puradak, Goobne Chicken, Kyochon Chicken, Dujjim, Lotte Fresh, Wonhalmonibossamjokbal, Frank Burger, Myeongnyunjinsagalbi, and Yoajeong. It is also known that at least two additional brands are preparing to file lawsuits.
Trials to follow one after another from March
From March, trials in the related cases will be in full swing. Hearings and mediation sessions are scheduled in cases involving Twosome Place, BBQ, BHC, Dujjim, and Burger King.
Law firm Doa announced that it plans to file lawsuits in mid to late March on behalf of franchisees of Mega Coffee and The Venti. Park Jongmyeong, managing partner at Doa (35th class of the Judicial Research and Training Institute), said, "We expect more than 1,000 people to participate in the lawsuit against the Mega Coffee franchisor."
Major law firms join en masse
The defendant franchise headquarters are mostly responding by retaining major law firms. Lotte Fresh is represented by Bae, Kim & Lee LLC, Baskin-Robbins, Goobne Chicken, and Frank Burger by Yulchon LLC, Puradak by Bae, Kim & Lee LLC, Twosome Place by Lee & Ko, and Wonhalmonibossamjokbal by Shin & Kim.
BHC and Burger King are reported to have appointed Kim & Chang as counsel. BBQ is represented by Trinity Law Firm, and Dujjim by Gaon Law Group.
The firm most actively representing the plaintiff franchisees is Law Firm YK. YK is handling a large number of cases, including those involving BHC, BBQ, Burger King, Baskin-Robbins, Twosome Place, Puradak, Goobne Chicken, Kyochon Chicken, Dujjim, Lotte Fresh, and Wonhalmonibossamjokbal. YK also represented the franchisees in the Pizza Hut case and secured a favorable judgment. Law Firm Choisun is representing the franchisees in the Frank Burger, Myeongnyunjinsagalbi, and Yoajeong cases.
Depending on the brand, from dozens to hundreds of franchisees are participating. Among the cases identified by Legal Times, the one with the largest number of participating franchisees is Baskin-Robbins, with 417 plaintiffs alone.
As the legal battles intensify, Law Firm Dongin recently formed a dedicated team. Law Firm LKB & Partners Pyeongsan has also organized a team and is responding.
What the Pizza Hut ruling said
On January 15, in the Pizza Hut case, the Supreme Court held that "for a franchisor to receive differential franchise fees from a franchisee, a specific meeting of the minds is required" (2024Da294033). The ruling indicates that if the existence and calculation method of such fees are not specified in the franchise agreement, or if it is difficult to deem that the franchisee has substantively consented, the amounts may be subject to restitution.
Differential franchise fees refer to the portion of the amount paid by franchisees that exceeds the "appropriate wholesale price" when the franchisor requires them to procure raw and subsidiary materials from designated suppliers; in effect, they are a type of distribution margin.
Cho Hanjoo and Shin Nayoung, reporters at Legal Times
※This article is based on content supplied by Law Times.
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