Franchise Business Act Lawyer | What Counts as Franchisor Misconduct, and How to Respond

Franchise Business Act | What Kinds of Franchisor Conduct Can Be Challenged

Not every disappointing outcome from a franchisor is a legal violation. The Franchise Business Act lists specific categories of misconduct, and identifying which one applies determines what remedy is available.

Franchise Business Act | Disclosure Document Violations and the Cooling-Off Period

Many franchise disputes actually trace back to what happened before the contract was even signed. If the disclosure process was rushed or misleading, that can undercut the validity of the whole agreement.

The 14-Day Rule

The franchisor must provide the disclosure document and give you at least 14 days (7 days if you used a franchise consultant registered with the relevant association) before it can receive any franchise fee or deposit (가맹사업법 제7조). If you paid a deposit before this period ran, that timing alone can be grounds to challenge the fee.

What Must Be in the Document

The disclosure document must include the franchisor's financial status, the number of terminated or non-renewed franchisees in recent years, and the actual basis for any sales or profit estimates presented. A pattern of franchisee turnover that was not disclosed is a factor courts and the KFTC look at closely.

Verifying Sales Projections

If you were shown an 'expected sales' figure for the location, the franchisor is required to keep supporting data for that estimate and provide it to you on request (가맹사업법 제9조 및 관련 시행령). A significant, unexplained gap between the estimate and actual performance is one of the more common bases for a damages claim.

Franchise Business Act | Responding to Contract Termination or Non-Renewal

Losing your franchise contract can mean losing the business you built. The law does not prevent all terminations, but it does require the franchisor to follow a fair process.

Notice and Cure Period

Before terminating, the franchisor must specify the grounds for termination in writing and give you a reasonable period, generally understood as at least two months, to correct the issue (가맹사업법 제14조). Termination that skips this step can be argued as procedurally invalid, regardless of whether the underlying complaint had merit.

Refusal to Renew at Contract Expiry

Separately from termination, a franchisee generally has the right to request renewal, and the franchisor's refusal is restricted once the franchisee has operated for a certain number of years under the contract (가맹사업법 제13조). Whether this protection applies depends on how many renewal cycles have already occurred and what the specific contract term says.

Recovering Deposits and Investment

If termination is found improper, the franchisee may be able to recover deposits, unamortized interior investment, or other costs tied specifically to the franchise relationship. The amount recoverable typically depends on how the original contract allocated these costs and how much time remained on the term.

Franchise Business Act | Territory Protection and Encroachment by New Stores

One of the most common complaints from existing franchisees is watching a new outlet of the same brand open just down the street. Whether that is actionable depends on what protection was actually written into the disclosure document and contract.

How the Protected Area Is Defined

The scope of your protected trade area is not set by statute as a fixed radius; it depends on what the franchisor disclosed and what the contract specifies for your brand and industry. Reviewing the original disclosure document is usually the starting point for determining whether a new store falls inside that area.

When a New Store Is a Violation

If a new store opens inside the disclosed protected area without the process the franchisor is supposed to follow (such as consultation or consent procedures set out in the disclosure document), this can be raised as a breach separate from any drop in your own sales. Sales decline is useful supporting evidence but is not itself the legal basis.

Franchise Business Act | Forced Purchases, Remodeling Demands, and Retaliation

Some of the most frequent complaints from franchisees involve day-to-day pressure rather than a single dramatic breach: being forced to buy overpriced supplies, being pushed into costly renovations, or facing retaliation after complaining.

Forced Purchase of Supplies ('Tying')

Requiring franchisees to purchase ingredients, packaging, or equipment exclusively from the franchisor or its designated vendor at unreasonable prices can be an unfair trade practice, particularly if cheaper equivalent goods are available and the requirement was not justified by legitimate quality or brand-consistency reasons (가맹사업법 제12조 제1항).

Interior Remodeling Cost-Sharing

When a franchisor requires store remodeling, the Act sets rules on how the costs must be shared between the franchisor and franchisee, and restricts how frequently mandatory remodeling can be required (가맹사업법 제12조의2 및 관련 시행령). A remodeling demand that ignores these cost-sharing rules can be challenged.

Documenting a Pattern for the KFTC

Because interference and retaliation often happen through informal pressure rather than a single written act, keeping a dated record of calls, texts, and visits from the franchisor's field managers matters a great deal when preparing a complaint to the Korea Fair Trade Commission.

Franchise Business Act | From Reviewing Your Contract to Resolution

Franchise Business Act | How Fees Are Typically Structured for Franchise Disputes

※ Costs vary depending on case complexity and specific circumstances; exact fees will be provided during consultation. No specific outcome is guaranteed.

Franchise Business Act | Self-Check Before You Contact a Lawyer

Frequently Asked Questions

Official References

• Korea Law Information Center — https://www.law.go.kr
• Easy-to-Find Everyday Legal Information — https://easylaw.go.kr
• Korea Legal Aid Corporation — https://www.klac.or.kr
• Ministry of Employment and Labor — https://www.moel.go.kr