[News Space=Reporter seungwon lee] Chicken headquarters have become busy during the chaotic end of the year. It is not because of the surge in delivery orders, but because of lawsuits with franchise owners.
It appears that franchisees and other franchisees are filing lawsuits against their franchisors, demanding the return of profits (franchise fees) earned by supplying raw and auxiliary materials at a higher price than the market wholesale price. Franchisees claimed that the franchisors’ collection of franchise fees without prior agreement constitutes “unjust enrichment.”
After the court ruled in favor of franchisees in the second trial of a lawsuit related to Pizza Hut Korea, Lotte Super and Lotte Fresh franchisees recently filed lawsuits, and franchisees of chicken franchises such as Kyochon Chicken and BHC Chicken are preparing to file lawsuits.
About 250 Kyochon Chicken franchisees plan to file a lawsuit against the franchise headquarters next month, January 2025.
About 280 BHC Chicken franchisees are also planning to file a lawsuit against the franchise headquarters to demand the return of unjust profits at the Seoul Central District Court. BHC Chicken franchisee A claimed, “The franchise agreement did not contain any clause stating that the headquarters would take the difference in franchise fees, but the headquarters recently sent us a contract with this added,” and “The headquarters was unfairly leaving a distribution margin without prior agreement.”
In the second trial of a lawsuit filed by 94 Korean Pizza Hut franchisees against the headquarters seeking the return of unjust profits, the Seoul High Court ruled in favor of the plaintiffs in part, ordering that "Korean Pizza Hut return the 21 billion won in franchise fees it received from franchisees between 2016 and 2022."
At the time, the court pointed out that if the franchisor receives a difference in franchise fees from the franchisee, an agreement on this must be included in the franchise agreement, but the Pizza Hut franchisor did not explicitly stipulate a difference in franchise fees in the franchise agreement.
In addition, as the conflict between chicken companies and franchisees intensified at the end and beginning of the year, Kyochon F&B, which operates Kyochon Chicken, filed a lawsuit against the Fair Trade Commission, stating that it could not accept the administrative disposition made by the Fair Trade Commission for “abuse of power by a partner company.”
On the 13th, a Kyochon F&B official explained, “We decided to file the lawsuit in order to receive an objective judgment from the court,” and “This is because we believe that our position was not sufficiently explained at the time of the Fair Trade Commission’s sanctions decision.”
In October, the Fair Trade Commission imposed a corrective order and a fine of 283 million won on the company for unilaterally lowering the distribution margins of its partners by taking advantage of its trading position.
