Franchise in Korea Misrepresentation

Michael Park, a specialist in Franchise Regulation at Pureum Regulation Workplace, explains.

I’d like to supply some precious insights into franchise legislation disputes in Korea and encourage you to think about Pureum Regulation Workplace on your authorized wants.

In August 2, 2021, the Korea Honest Commerce Mediation Company, beneath the Honest Commerce Fee, reported that over 27% of home franchise disputes had been associated to ‘misrepresentation.’

Since then, the state of affairs has not considerably modified. Significantly, the courts have a tendency to carry franchisors extra strictly accountable for misrepresentation in comparison with different violations of the Franchise Enterprise Act, comparable to failing to supply a disclosure doc.

Amongst these misrepresentations, offering false info relating to gross sales or earnings is probably the most problematic. In lots of nations with established franchise legal guidelines, comparable to China, offering projected gross sales figures is outright prohibited to forestall the potential of misrepresentation.

Nonetheless, beneath the present Korean Franchise Enterprise Act, franchisors can select whether or not to supply ‘projected gross sales figures.’

In the event that they do, Article 9 of the Franchise Enterprise Act mandates that such info have to be supplied in writing and the idea for these projections have to be documented. Moreover, if the franchisor is a big company or has greater than 100 franchise areas in Korea, they’re required to supply these projected gross sales figures. Latest statistics point out that solely about 4% of franchisors fall into this class.

You possibly can achieve deeper information by reviewing associated instances in comedian type by means of this hyperlink.

Violations of those rules can result in vital liabilities beneath Article 9 of the Franchise Enterprise Act. Significantly, if the projected gross sales figures supplied, whether or not orally or in writing, are false, the franchisee could also be entitled to full compensation for the prices incurred in establishing the franchise. This entails varied contentious points such because the scope of damages, whether or not enterprise losses are included, the potential for punitive damages, and whether or not emotional misery damages might be claimed when proving the quantity of loss is troublesome.

In case you are a franchisor making ready to conduct enterprise in Korea, it’s essential to seek the advice of with an legal professional who has in depth expertise and specialised coaching in franchise legislation to reduce the danger of being accused of misrepresentation.

For extra info and skilled authorized help, please contact us straight.