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I would like to file franchise litigation. What should I do?

I quit my company and ended up opening a franchise café. However, when I first signed the contract, they said that no same-brand business could open nearby, but a short while later one opened right in a nearby location. So I confronted the headquarters, and they said that there was nothing they could do either, telling me something different from what they had said at the time of the contract. Since then, my sales have dropped so much that I am distressed. Would I be able to win if I file franchise litigation?

Franchise litigation

Answer

Published: 2025-04-11

Author : DongIl PARK

When a franchisee such as you enters into a franchise business transaction, the franchisor may be recognized as having violated the prohibition against unfair business-territory infringement.

If a franchisee suffers damage because the franchisor violated the prohibition against unfair business-territory infringement, the franchisee may claim damages from the franchisor.

In this case, clearly proving that the franchisor acted with intent or negligence becomes the key issue of the litigation.

If such a problem arises, one can clearly determine whether the headquarters has in fact committed an unlawful act and whether there was in fact no justifiable reason, and can then respond by, for example, filing a report with the Fair Trade Commission.

However, reasons such as reconstruction, redevelopment, or a rapid change in the commercial district do not constitute unfair business-territory infringement, so you should keep this in mind.

Thereafter, if the franchisor has committed unfair business-territory infringement, it will be assessed a penalty surcharge by the Fair Trade Commission.

On this basis, the franchisee may file a damages lawsuit against the headquarters and be compensated for the amount of loss.

Thereafter, in order to prepare a legal review and pleading suited to the current situation, the assistance of an attorney with legal expertise in the relevant field is important.