Franchise contract dispute case analysis

In 2003, **Tang Company entered into a franchise agreement with Tang. It was agreed that **Tang Company would grant Tang the franchise right of the "Typhoon Shelter Teahouse" and teach him franchise store knowledge for a period of 5 years. Tang should pay a franchise fee of 15 10,000 yuan (non-refundable under any circumstances), a franchise deposit of 100,000 yuan (non-deposit nature, **Tang Company has the right to confiscate it in the event of Tang’s breach of contract, etc.), and monthly royalties, franchise advertising fees, etc. . It was also agreed that if one party breaches the contract, the other party can terminate the contract, and the liquidated damages will be 300,000 yuan. The company that Tang participated in the establishment of the franchise shall bear joint and several liability for Tang's above-mentioned obligations. After signing the contract, Tang paid a franchise fee of 150,000 yuan and a deposit of 30,000 yuan. Tang and others jointly invested in the establishment of ** Catering Company, which was used as the carrier to operate the "Typhoon Shelter Teahouse" franchise store. Later, due to Tang's long-term arrears in royalties and franchise advertising fees, **tang Company filed a lawsuit in 2004 after unsuccessful efforts to demand payment, requesting an order to terminate the franchise; Liquidated damages of 300,000 yuan and franchise deposit of 30,000 yuan; the ** catering company established by Tang shall bear joint and several liability. Tang counterclaimed that because **Tang Company failed to perform its obligations such as employee training and advertising production, it requested continued performance, and **Tang Company shall bear the liability for breach of contract. At the same time, Tang believed that the liquidated damages in franchising were too high and requested the court to adjust them. **The catering company agreed with Tang’s opinion and had no objection to assuming joint and several liability.

[Trial]

After trial, the court of first instance held that: **Tang Company has fulfilled its relevant obligations in accordance with the contract. Tang's breach of contract in arrears of relevant fees has constituted a condition for the termination of the contract. **Tang Company has the right to terminate the contract. After the contract is terminated, the consequences of the contract shall be dealt with together. The court then ruled to terminate the franchise contract between the two parties. Tang paid **Tang Company 4,171.28 yuan in franchise advertising fees and royalties as well as liquidated damages of 150,000 yuan. ** Catering Company shall bear joint and several liability; **Tang Company returned Tang’s franchise fee The fee is 120,000 yuan and the franchise deposit is 30,000 yuan. **Tang Company was dissatisfied and appealed, claiming that the franchise fee and deposit should not be returned and that Tang should pay liquidated damages in full. After trial, the court of second instance held that: the franchise fee is a one-time fee paid by the franchisee to the franchisor in order to obtain the franchise right. The clause in the disputed contract regarding the non-refundability of the fee is consistent with the nature of the fee and industry practice, and The contract was terminated due to Tang's breach of contract, so the franchise fee should not be refunded. Based on the actual performance of this case, since **Tang Company failed to provide evidence to prove its specific losses, the liquidated damages awarded in the original trial were obviously too high and should be reduced as appropriate. The disputed deposit does not have the nature of a deposit and should be returned. Therefore, the judgment was changed and the clause in the main text of the original judgment regarding **Tang Company's refund of Tang's 120,000 yuan franchise fee was revoked, and the same wasThe amount of liquidated damages paid by Tang was changed from RMB 150,000 to RMB 30,000.

[Consensibility and Law Perspective]

This case is a typical franchise contract dispute. The reason for the dispute is that after the franchise contract is terminated in advance, the two parties cannot reach an agreement on the consequences of the termination of the contract. This is a relatively prominent issue in the current franchise disputes and is representative. The following is a discussion of the legal issues reflected in this case based on the focus of the dispute, with a view to providing a reference for the resolution of similar disputes.

1. Whether the franchise fee should be refunded

The franchise fee is generally It is a one-time payment made by the franchisee after the franchise contract is signed. The "Commercial Franchise Management Measures" issued by the Ministry of Commerce defines the franchise fee as "a one-time fee paid by the franchisee to the franchisor for obtaining the franchise right." Although the "Measures" are administrative regulations and are not of high effectiveness, the franchise fee is The definition can still be used as a reference when hearing this case.

In practice, both parties to the franchise often do not know the nature of the franchise fee. They only agree that the franchise fee should be paid in one go. Some regard the franchise fee as part of the contract. It is a part of the franchise fee or an advance payment, and some understand the franchise fee as a contract deposit. Therefore, when the contract is terminated before the expiration of the contract performance period, the franchisee parties have a dispute over whether the franchise fee should be returned

2. Whether the franchise deposit should be returned

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Regarding the deposit in franchising, the definition in the "Commercial Franchise Management Measures" is "In order to ensure that the franchisee performs the franchise contract, the franchisor shall A certain fee charged by the franchisee. After the contract expires, the deposit shall be returned to the franchisee." Obviously, the purpose of collecting the deposit is to guarantee the performance of the contract, but this form of guarantee is different from the commonly referred to as a deposit. The difference is that The "deposit penalty" cannot be applied: when one party breaches the contract, the other party cannot deduct or require double the return of the deposit.