[Law Firm Now] Jipyung Seminar: "Franchisors Must Identify Key Differences from Pizza Hut"

Comparison of Supreme Court Rulings on the Pizza Hut and Mom's Touch Cases

Careful Review of Franchise Agreements, Including Attachments

Identifying the Basis for 'Agreement' on Differential Franchise Fees

"From the perspective of the franchise headquarters, the most important thing is to identify differences from Company P (Pizza Hut). First, it is necessary to review whether there is a clause in the franchise agreement, including all annexes, that provides grounds for receiving differential franchise fees."

At the seminar titled "Countermeasures for Differential Franchise Fees and the Fair Trade Commission's Law Enforcement Direction in the Franchise Sector," held on May 12, 2026, in the main conference room of Habitus Associates Law Firm (Co-Represented by Attorneys Kim Jihong and Lee Haenggyu) in Jung-gu, Seoul, partner attorney Sangyun Kim, who delivered the first keynote presentation, spoke about ways to prepare for lawsuits by franchisees against franchise headquarters regarding differential franchise fees.

On the afternoon of the 12th, a seminar titled "Countermeasures for Differential Franchise Fees and the Fair Trade Commission's Law Enforcement Direction in the Franchise Sector" was held in the large conference room on the 26th floor of Building A, Grand Central, Jipyung Headquarters, Jung-gu, Seoul. Habitus Associates Law Firm

Attorney Kim stated, "Earlier this year, there was a truly shocking precedent. It was not just about one or two years of differential franchise fees; a precedent came out that could require the headquarters to return all differential franchise fees accumulated over time, which has a huge impact," adding, "If a franchise headquarters fails to highlight its differences from Company P, the risks could be high."

On this day, Attorney Kim compared two Supreme Court cases from earlier this year regarding differential franchise fees involving Pizza Hut and Mom's Touch, providing a detailed explanation on how franchise headquarters should respond before and after litigation. This drew significant attention from franchise headquarters officials attending the seminar.

He explained, "In the case of Company M (Mom's Touch), the issue was about the validity of the headquarters' price increase for patties, so it was not a classic differential franchise fee lawsuit regarding whether the headquarters could receive differential franchise fees from franchisees." However, he also emphasized, "It is important to note why the Supreme Court reached different conclusions in the two cases."

Attorney Kim noted the following points as the basis for the Supreme Court siding with the headquarters in the Mom's Touch case, in contrast to the Pizza Hut case, where it was difficult to find grounds for agreement on receiving differential franchise fees either in the franchise agreement or in surrounding circumstances: ▲ While the headquarters did not present a written agreement, it posted a notice explaining the reason for the price increase; ▲ After the notice was posted, multiple franchisees acknowledged the increase and the headquarters proceeded with the price hike (Attorney Kim added that, in reality, many franchisees only reluctantly accepted the headquarters' decision rather than fully agreeing); ▲ It was difficult to definitively state there was no justification for the price increase at the time (Attorney Kim clarified that although the purchase price of patties for the headquarters had actually decreased, making the increase difficult to understand, the headquarters appeared to have considered various other factors beyond just the purchase price); ▲ The franchisee council, composed of a majority of franchisees, engaged in negotiations for a second price increase with the headquarters on the premise that the first increase (which the Supreme Court later ruled invalid due to procedural violations) was valid. These points, he explained, served as the grounds for the Supreme Court's decision in favor of the headquarters.

At the seminar on "Measures to Address Differential Franchise Fees and the Fair Trade Commission's Enforcement Direction in the Franchise Sector" held on the afternoon of the 12th at the Grand Central, Building A, 26th floor conference room in Jipyeong Headquarters, Jung-gu, Seoul, partner attorney Sangyun Kim is giving a presentation. Photo by Seokjin Choi

Attorney Kim advised that, for franchise headquarters at risk of being sued by franchisees for differential franchise fees, it is necessary to build circumstances that could appear to validate previous practices of receiving such fees. Once litigation is initiated, the franchise agreement, annexes, and disclosure statements must all be thoroughly reviewed to find any clauses that could serve as the basis for an agreement on receiving differential franchise fees.

He also added that even if the headquarters loses in court and is required to return differential franchise fees to franchisees, efforts should be made to minimize the amount to be returned. In the Pizza Hut case, the court calculated unjust enrichment for periods where the statute of limitations had not expired, starting with the most recent year and then deducting a certain percentage from the amount for each preceding year in sequence. The burden of proof for the amount of unjust enrichment to be returned lies with the franchisee, that is, the party filing the claim for return of unjust enrichment.

In the second presentation, partner attorney Jongheon Lee discussed the Fair Trade Commission's enforcement direction in the franchise sector, covering recent policy trends such as strengthening regulations on essential items, making it mandatory for franchisee organizations to consult, and focusing on inspections for unfair practices. He suggested that, as the Fair Trade Commission’s supervision and law enforcement in the franchise sector become more stringent, franchise headquarters should also proactively review and respond to their contracts and operational systems.

Attorney Kim, who previously served as head of the Franchise Transaction Investigation Team at the Fair Trade Commission, also mentioned that the Commission is currently reviewing the revival of the Investigation Bureau—known as the "grim reaper for large corporations"—for the first time in 21 years, and stated, "If the Investigation Bureau is revived, a comprehensive investigation into the entire franchise business sector could be conducted."

From the left, Partner Lawyer Byungju Lee, Head of the Fair Trade Group at Jipyung Law Firm, Partner Lawyer Sangyun Kim, and Partner Lawyer Jongheon Lee. Jipyung Law Firm

Following the presentations, a Q&A session was held, moderated by partner attorney Byungju Lee, Head of the Fair Trade Group, where officials from franchise headquarters in attendance were able to ask questions.

Attorney Byungju Lee stated, "Due to recent legal and institutional changes surrounding differential franchise fees and regulations on essential items, it is time for franchise headquarters to establish more systematic response strategies," adding, "Habitus Associates will provide solutions and advice for preventing disputes and practical responses related to differential franchise fees for franchise headquarters, based on close analysis of the latest case law and regulatory trends."

This seminar attracted a high level of industry interest, with pre-registration closing early, and was successfully held with the participation of key officials from major domestic companies in the distribution, consumer goods, food service, and platform sectors.

This content was produced with the assistance of AI translation services.