2. The costs of lawsuit shall be borne by the Plaintiff.

A. The Defendant is a company that engages in franchise business with the right to sell in the Republic of Korea the brand called “Dominomian,” and the Plaintiff entered into a franchise agreement with the Defendant and operated the “Dominomian ○○○○” (hereinafter “instant store”) in Gangnam-gu Seoul Metropolitan Government (hereinafter “Detailed Address omitted).

B. The Plaintiff decided to take over the instant store operated by the Defendant from the Defendant, and entered into a provisional contract with the Defendant on April 9, 1999 as KRW 270,00,000, and as of April 30 of the same month as the transfer date, and paid KRW 27,00,000 as down payment to the Defendant on the same day. The Plaintiff entered into a comprehensive transfer contract with the Defendant on April 30, 1999, which is the date of taking over the instant store under the above provisional contract (hereinafter “instant transfer contract”), and paid KRW 243,00,000 in the balance to the Defendant on the same day, taking account of the fact that Nonparty 5, who was the Defendant’s business director, operated the instant store in the name of Nonparty 4 under the Defendant’s own name, and that the Plaintiff was obligated to take over the remainder of KRW 40,000,000 under the Defendant’s account deposit contract with the Defendant’s 60,000,000.

C. In addition, on May 1, 1999, the Plaintiff entered into a franchise agreement with the Defendant on the sales chain for the instant store with the term of three years, and the said agreement was renewed twice on May 1, 2002 and May 1, 2005, and the major contents of the franchise agreement renewed on May 1, 2005 are as shown in the attached franchise agreement (hereinafter “instant franchise agreement”).

D. On August 9, 2007, the Plaintiff requested the Defendant to approve the transfer of business in accordance with the instant franchise agreement in order to transfer the entire goodwill of the instant store to the Nonparty (the Nonparty in the judgment of the Supreme Court) who is the Plaintiff-friendly Nonparty (the Nonparty). However, the Defendant refused to approve the transfer of business on the 29th of the same month.

E. After that, on January 14, 2008, the Defendant notified the Plaintiff that the instant franchise agreement will expire on April 30, 2008, and that the instant franchise agreement will not be renewed or extended after the expiration of the contract term. Accordingly, the Plaintiff was eventually suspended from operating the instant franchise because the Plaintiff did not supply food materials, etc. necessary for manufacturing the recipient, etc. from May 1, 2008 to the Plaintiff.

[Ground of recognition] Unsatisfy, Gap evidence Nos. 1, 2, 3, 4, 6, 7 (including branch numbers), and the purport of the whole pleadings

2. Facts constituting the Plaintiff’s assertion

A. Compensation for damages caused by unlawful destruction of a contract

1) The store of this case was directly operated by the Defendant, and the Plaintiff received all rights and obligations regarding the store of this case from the Defendant, and the Plaintiff and the Defendant entered into the instant franchise agreement to guarantee the Plaintiff’s business rights. Therefore, regardless of the duration stipulated in the instant franchise agreement, the Defendant may not terminate or terminate the instant franchise agreement unless the Plaintiff breached obligations under the instant franchise agreement, and there is a reason to terminate the said agreement, such as breach of obligations under the contract on the transfer of business. However, the Defendant refused to renew the instant franchise agreement and infringed on the business rights guaranteed under the instant contract on the transfer of business, by refusing to renew the instant franchise agreement, notwithstanding the absence of the reason to terminate the contract

2) In addition, even according to the instant franchise agreement, even if the term of existence is set in the franchise agreement, the Defendant, even if having set the term in the franchise agreement, should have grounds such as the Plaintiff’s breach of contract to refuse renewal due to the obligation to renew the franchise agreement. Notwithstanding the fact that the Plaintiff did not violate the instant franchise agreement, the Defendant refused the renewal of the instant franchise agreement and thereby

3) Therefore, the Defendant is liable to pay KRW 129,327,288, which is equivalent to the Plaintiff’s expected operating income, from May 1, 2008 to October 30, 2008, when the Defendant reversed the instant franchise agreement, to the Plaintiff, as damages, the amount of KRW 129,327,288 (amount of KRW 21,554,548 per month x 6 months) which would have been equivalent to the Plaintiff’s expected operating income.

4) In addition, the Plaintiff originally intended to transfer the store of this case to Nonparty 1 at KRW 1,400,000,000, and the Defendant was well aware of the aforementioned facts. The Plaintiff was unable to transfer the store of this case due to the Defendant’s unlawful termination of the contract. Therefore, the Defendant is obligated to pay KRW 1,300,000 (= [1,400,000,000], which is the profit that the Plaintiff could have gained when the Plaintiff transferred the store of this case to the Plaintiff.

(b) Compensation for any unfair trade practice in connection with the purchase of raw or secondary materials;

1) According to the instant franchise agreement, the Defendant supplied the Plaintiff with raw and secondary materials necessary to maintain the identity of brand and product quality. Under the above provision, the Defendant supplied all franchisees with goods necessary to manufacture and sell the skin, etc. However, from around 2002, the Defendant forced the Defendant to purchase the goods from the Defendant from around 2002 to the point of view of maintaining the uniform image of the instant franchise business and the same quality of the goods. The Defendant’s act constitutes an illegal act that constitutes an act of binding upon the other party or an act of compelling purchase that abused the transactional position.

2) Due to the Defendant’s unlawful compulsory purchase as above, the Plaintiff suffered damages of KRW 242,575,806 in total from January 1, 2002 to April 30, 2008, and thus, the Defendant is obligated to pay the amount equivalent to the same amount to the Plaintiff as damages.

(c) Compensation for damages caused by unjust coercion of advertising expenses;

1) The Plaintiff and the Defendant agreed to pay 3% of the sales amount with respect to the expenses of nationwide advertisements. Since December 2003, the Defendant raised the sales amount to be unilaterally borne by the Plaintiff from around December 2, 2003 to 4.5% and 6% of the sales amount without prior consultation with the Plaintiff. This is an illegal act that constitutes an abuse of trade position.

2) As such, due to the Defendant’s unfair coercion, the Plaintiff suffered an additional loss of KRW 56,674,304 as a sum of the advertising expenses between December 28, 2003 and April 20, 2008, and thus, the Defendant is liable to pay the Plaintiff the same amount as the damages.

(d) Compensation for damage caused by unjust coercion in connection with the exercise of discount;

1) The Defendant, from around 2001, conducted an exchange card discount event that gives a discount to the above mobile communications subscribers by 15% to 30% of the price of the recipient. The information disclosure statement or the instant franchise agreement on the burden of expenses incurred from the above discount event is not stipulated in the information disclosure statement or the instant franchise agreement, and even though the relevant cost was not foreseeable for franchisees including the Plaintiff, the Defendant forced the Plaintiff to bear all of the costs. The Defendant’s act constitutes unfair trade practices by forcing the other party to bear the costs unfairly by using its transaction status. The Defendant’s act constitutes unfair trade practices by forcing the other party to the transaction to bear the costs unfairly by forcing the other party to bear the costs.

2) Accordingly, the Plaintiff suffered damages of KRW 138,00,000 in total from 2003 to January 2008, and the Defendant is liable to pay the amount equivalent to the damages to the Plaintiff.

E. Total sum of damages

Therefore, the defendant is liable to pay to the plaintiff 1,866,577,398 won (=129,327,288 won + 1,300,000,000 + 242,575,806 + 56,674,304 + 138,000,000 won) and damages for delay.

3. Determination

A. Judgment on the assertion of unlawful reversal of a contract

(1) Relationship between business transfer contracts and franchise agreements

As seen above, the Plaintiff entered into the instant franchise agreement and the instant franchise agreement with the Defendant. As such, in light of the following: (a) whether the Plaintiff was subject to restrictions on the termination or the refusal of the instant franchise agreement due to the Plaintiff’s acquisition by transfer of the instant store from the Defendant; and (b) the purpose and content of the instant franchise agreement; (c) although the parties to the said agreement were the same, the legal status of both parties in each of the above contracts and the legal relationship governing each of the above contracts are entirely different; and (d) it is reasonable to deem that the legal relationship between the Plaintiff and the Defendant with respect to the instant franchise business is entirely governed by the instant franchise agreement

Therefore, regardless of whether the acquisition by transfer of this case violated the obligation under the franchise agreement, the defendant can lawfully terminate the franchise agreement if there is a reason for termination of the contract, such as the reason for termination under the franchise agreement, (However, due to the unique nature of the franchise agreement, the defendant is obligated to maintain the franchise agreement for a certain period to the plaintiff and its franchisees, and the fact that the plaintiff directly acquired the store of this case from the defendant can be an important factor in determining the mandatory duration of the franchise agreement.

2) Whether the refusal to renew the franchise agreement is unlawful

A) Relevant laws and regulations

The former Act on Fair Transactions in Franchise Business (amended by Act No. 8630 of August 3, 2007; hereinafter “former Franchise Business Act”).

Article 13 (Notice, etc. of Termination of Franchise Agreement)

(1) Where a franchiser fails to renew or extend a franchise agreement, it shall notify the franchisee of the fact in writing 90 days prior to the expiration date of the agreement.

(2) If a franchiser fails to notify under paragraph (1), the franchiser shall be deemed to have concluded the franchise agreement again on the same conditions as the franchise agreement before the termination of the agreement: Provided, That the foregoing shall not apply where a franchisee files an objection 60 days prior to the expiration date of the agreement or where any inevitable reason prescribed by Presidential Decree exists, such as natural disaster

Franchise Business Act (amended by Act No. 8630, Aug. 3, 2007; hereinafter “Revised Franchise Business Act”)

Article 13 (Renewal, etc. of Franchise Agreement)

(1) Upon request by a franchisee to renew the franchise agreement between 180 and 90 days before the expiration date of the franchise agreement, no franchiser shall reject such request without justifiable grounds: Provided, That the foregoing shall not apply to any of the following cases:

1. If a franchisee fails to comply with the obligation to pay the franchise fee or similar on the franchise agreement;

2. If a franchisee fails to accept any term or condition of the agreement or business policy that generally applies to other franchisees;

3. If a franchisee fails to observe the franchiser' important business policy that is considered necessary for maintaining the franchise business and that falls under any of the following items (the subparagraphs are omitted):

(2) A franchisee's right to request the renewal of the franchise agreement may be exercised only when the total period of the franchise agreement, including its initial period, does not exceed ten years.

B) Determination

However, according to the franchise agreement in this case, the term of the franchise agreement is three years, and either party may notify the other party of the termination in writing not later than three months prior to the expiration of the term. In light of such franchise agreement, it is reasonable to view that the defendant, in principle, may freely decide whether to renew the contract upon expiration of the term (Article 4 of the Addenda to the amended Franchise Business Act, although the franchise agreement in this case was concluded before the enforcement of the amended Franchise Business Act, the amended Franchise Business Act does not apply (see Article 4 of the Addenda to the Amended Franchise Business Act).

However, in light of the characteristics of the franchise business, it is difficult to say that the franchisor can refuse the renewal at any time at the time when the contract period stipulated in the franchise agreement expires, and the franchisor cannot refuse the renewal of the franchise agreement by protecting the trust in the existence of the above contract and protecting the trust of the franchisee for a considerable period of time.

In the instant case, the instant franchise agreement has been renewed twice after the initial contract, and the franchise agreement has been continued for a total of nine years. In light of the recognition period of the franchisee’s right to request renewal (10 years) guaranteed by the amended Franchise Business Act, as seen earlier, the Plaintiff’s direct transfer of the instant store from the Defendant, etc., the nine-year period is deemed sufficient period to protect the expectation interest, etc. as to the existence of the Plaintiff’s franchise agreement. Thus, the Defendant is free to refuse renewal of the instant franchise agreement.

Furthermore, as seen in the above basic facts, the defendant expressed his/her intent to refuse renewal on January 14, 2008, which was three months before the expiration date of the contract pursuant to the former Franchise Business Act and the instant franchise agreement, from April 30, 2008 to April 14, 2008, and thus, the defendant's rejection of renewal is lawful. Accordingly, the plaintiff's assertion that the defendant illegally reversed the instant franchise agreement is without merit.

B. Determination on the assertion of unfair trade practices regarding the purchase of raw and secondary materials

1) Facts of recognition

In full view of the statements in Gap evidence 13 and Eul evidence 1-1 to 24 and the testimony of non-party 3, the defendant classified the articles to be manufactured and sold by the respondent and its franchisees, including the plaintiff, in accordance with the franchise agreement of this case as important food materials (i.e., "cincation items") and other food materials (i.e., "cincation items"), so that they can be purchased from the defendant. Other food materials can be purchased from the defendant or can be freely purchased from the general public at the time at the option of the franchisees, such facts and a list of important food materials to be purchased from the defendant, and the list of important food materials to be purchased from the defendant in accordance with the Franchise Business Act. The defendant can recognize that the defendant notified the franchisees including the plaintiff in advance, if the above important food materials are modified or prices change, and the defendant has notified them in accordance with the franchise agreement of this fact in advance to secure the uniformity of image and external consumer protection of the stores of this case and the goods designated by the defendant (i.e., the goods designated by the plaintiff).

(ii) the board;

The franchise business of this case is a business that sells products of a uniform quality nationwide through a standardized system. Due to its nature, there is a need to maintain the same nationwide distribution process, distribution period, etc. using normal and safe raw materials. However, if a franchise store purchases individual raw materials, it would be impossible to maintain the quality of the above. The plaintiff was well aware of this fact at the time of the franchise agreement of this case. In addition, when the defendant changes in the items or prices of important food materials, the plaintiff immediately notified the plaintiff of this fact and provided an opportunity to present his opinion. In light of the fact that the price of the important food materials designated by the defendant is too higher than the market price, it cannot be seen that the defendant gains unfair profits than the market price, the defendant's provision of certain raw materials from the defendant is within the scope necessary to attain the purpose of franchise business in light of the specific operation circumstances of the franchise business of this case, and it cannot be viewed that the defendant's purchase of certain raw materials has no intention to compel the other party to purchase the goods.

C. Determination on the assertion of unfair coercion against advertising expenses

1) Facts of recognition

In full view of the statements in Gap evidence 14, Eul evidence 3, 4, 17 and the testimony of non-party 3 of the witness non-party 3, the following facts may be acknowledged.

A) On June 26, 2001, the Plaintiff entered into an agreement with the Defendant on the sharing of advertising expenses that the Defendant performed nationwide with respect to the instant franchise business. The main contents are as follows (hereinafter “instant agreement”).

Article 1 (Definition of Advertisement Expenses)

The plaintiff and the defendant share the expenses for advertising expenses according to the prescribed methods and rates with respect to the advertisement planned by the defendant and pay them to the defendant.

Article 2 (Calculation Basis of Advertising Expenses)

The ground for calculating advertising costs of the Plaintiff is the basis for calculating advertising costs: Provided, That if there is a change in the method of calculating advertising costs and the amount of advertising costs, the Plaintiff and the Defendant may be changed through mutual consultation.

Article 4 (Sharing Ratio of Advertising Expenses)

The Plaintiff’s advertising cost apportionment rate shall be determined and shared by 3% (offline) of the amount of RYAY SALS: Provided, That among the advertising expenses currently claimed, other expenses excluding pure advertising expenses (radio postal service charges, Handphones, membership cards, and cphone purchase fees) shall be separately claimed.

B) However, the Defendant changed the proportion of advertising expenses from time to time within the scope of 3% and 6% of the sales amount due to the change of the market competition and the business environment. The Defendant, as above, notified the Plaintiff and its franchisees in writing in order to change the proportion of advertising expenses, obtained written consent from the franchisees, and the Plaintiff consented to the change whenever the proportion of advertising expenses is changed.

C) Meanwhile, the Defendant shared advertising expenses with respect to the Defendant’s royalty revenue and the sales of food materials at the same rate as the Plaintiff and its franchisees, including the Plaintiff. Accordingly, if the Plaintiff’s advertising expenses sharing rate is increased, the Defendant’s advertising expenses sharing rate was also increased.

(ii) the board;

In light of the above facts, even if the matters concerning the increase in the advertising cost sharing rate are not specified in the franchise agreement of this case (Article 9 of the franchise agreement of this case provides that the plaintiff shall pay 3% of the royalty sales to the defendant as the National Advertising Fund, but the increase in the advertising cost sharing rate is not stipulated) under the agreement between the contracting parties, it is reasonable in the principle of freedom of contract to increase the advertising cost sharing rate under the agreement of the contracting parties. In addition, according to the advertising cost agreement of this case, the special contract related to the advertising cost of this case, which can be called the special contract of this case, the defendant can change the advertising cost sharing rate through consultation with the plaintiff. The defendant has obtained the plaintiff's consent each time the advertising cost sharing rate is to be changed under the above agreement, and the defendant's advertising cost sharing rate has increased accordingly, if the plaintiff's advertising cost sharing rate is increased, the increase in the advertising cost sharing rate of this case has also increased to the same rate, and the change of the advertising cost sharing rate is also difficult to be considered to achieve the overall purpose of the plaintiff's sales.

D. Determination on the assertion of unjust coercion in relation to the exercise of discount

1) Facts of recognition

In full view of the statements in Eul evidence 4-1 to 6, 17 and the testimony of non-party 3, the defendant entered into an association with SK Telecom which is a mobile communication company since 2001 and discounted 15% or 30% of the price of the beneficiary sold by the defendant to the above mobile communication subscribers. Among the above discounted amounts, some of the above discounted amounts are borne by SK Telecom, and the remainder is borne by the franchisee including the plaintiff. Since November 2005, the defendant entered into an association with LG Telecom with LG Telecom with 15% of the price of the beneficiary. Since November 2005, the defendant paid a discount to the above mobile communication subscribers, including the plaintiff, at a discounted rate of 15% of the price of the beneficiary. However, in implementing the above discount, the defendant has been notified of the change in the discount rate and notified each of the changes in the discount rate.

(ii) the board;

However, according to the above facts, the defendant, while holding a discount event for mobile communications, did not bear any expenses, and did not bear the expenses for discount only to its franchisees including the plaintiff. However, the plaintiff already agreed in the franchise agreement of this case (Article 30) to mandatorily participate in the nationwide discount event held by the defendant. The above discount event eventually leads to the increase of awareness about the franchise business of this case, the increase of image, and the increase of sales, and even if the plaintiff fully bears the price of the product at discount event, it cannot be viewed as losses to the plaintiff (this discount event does not have any evidence to support that the plaintiff actually suffered losses, such as the reduction of net profit, etc., compared to the above discount event). In light of these facts, the defendant obtained the plaintiff's consent whenever there is a change in the discount rate and the discount rate, and even if the defendant unilaterally bears the expenses for the discount event, it cannot be said that the plaintiff's act was done with any disadvantage within the extent of the purpose of the franchise business. Therefore, it cannot be said that the plaintiff's act was not justified.

4. Conclusion

Therefore, the plaintiff's claim of this case is dismissed as it is without merit. It is so decided as per Disposition.

【Omission of Merchant Agreement】

Judges Park Jae-ho (Presiding Judge)