Payment of Franchise Deposit
Request to pay a franchise deposit
- In any of the following cases, a franchiser may request the head of the depository to pay a franchise deposit (Article 6-5(3) of the 「Fair Transactions in Franchise Business Act」).
· When a franchisee commences his/her business
· When two months have passed since the date of execution of a franchise agreement
- When a franchiser requests the head of the depository to pay a franchise deposit, it shall not make the request by fraudulent or otherwise improper means (Article 6-5(4) of the 「Fair Transactions in Franchise Business Act」).
※ Any person who requests the payment of a franchise deposit by fraudulent or otherwise improper means shall be punished through the imposition of a fine not exceeding an amount equivalent to double the franchise deposit (Article 41(4) of the 「Fair Transactions in Franchise Business Act」).
Payment of franchise deposit
- Where a franchiser requests the payment of a franchise deposit, the head of the depository shall pay the franchise deposit to the franchiser within ten days (Article 6-5(3) of the 「Fair Transactions in Franchise Business Act」).
- However, the foregoing shall not apply where a franchisee notifies, in writing, the head of the depository that he/she has taken a measure that falls under any of the following before the expiration of two months (Proviso to Article 6-5(3) Subparagraph 2 of the 「Fair Transactions in Franchise Business Act」).
· Franchisee files a lawsuit seeking the refund of his/her franchise deposit
· Franchisee files an application for intercession, mediation, or arbitration seeking refund of his/her franchise deposit
· Franchisee reports to the Fair Trade Commission that the franchiser has violated a provision regarding the return of franchise fees
Withholding, etc. of Payment of Franchise Deposit
Withholding of payment of franchise deposit
- In any of the following circumstances, the head of the depository shall withhold the payment of a franchise deposit to a franchiser (Article 6-5(5) of the 「Fair Transactions in Franchise Business Act」)
A) Franchisee or prospective franchisee files a lawsuit seeking the refund of the franchise deposit
B) Franchisee or prospective franchisee files an application for intercession, mediation, or arbitration seeking the refund of a franchise deposit
C) Franchisee or prospective franchisee reports to the Fair Trade Commission that the franchiser has violated a provision regarding the return of franchise fees
- Where any grounds for the withholding of payment arises, a franchisee or prospective franchisee shall submit a written request to withhold the payment of the franchise deposit to the head of a depository, accompanied by a document proving the related facts (Article 6-5(5) of the 「Fair Transactions in Franchise Business Act」, Article 5-9(2) and Attached Form No. 8 of the Enforcement Decree of the 「Fair Transactions in Franchise Business Act」).
- The head of a depository shall withhold the payment of a franchise deposit until the results of mediation by the Franchise Business Transaction Dispute Mediation Council, the settlement of any other dispute is achieved or a corrective measure taken by the Fair Trade Commission becomes final and conclusive (Article 6-5(5) of the 「Fair Transactions in Franchise Business Act」).
※ Where an appeal is filed with respect to a corrective measure taken by the Fair Trade Commission, referring to the time an adjudication becomes final and conclusive and where a lawsuit is filed for a corrective measure or adjudication, referring to the time a final judgment is rendered (Article 6-5(5) of the 「Fair Transactions in Franchise Business Act」).
Rejection, etc. of the payment of franchise deposit
- If a franchiser makes a request for the payment of its franchise deposit by fraudulent or otherwise improper means, the head of a depository shall reject such request, or require the modification of its contents (Subparagraph 4 of Article 6-5(5) of the Fair Transactions in Franchise Business Act」).
Payment, etc. of franchise deposit
- If a franchiser, franchisee or prospective franchisee intends to request the payment or return of a franchise deposit, the franchiser, franchisee or prospective franchisee shall submit a written request for the payment or return of a franchise deposit to the head of the depository, accompanied by a document proving the pertinent facts (Article 6-5(6) of the 「Fair Transactions in Franchise Business Act」 and Article 5-9(3) of the 「Enforcement Decree of the Fair Transactions in Franchise Business Act」).
- The head of the depository shall pay or return the franchise deposit to the franchiser, franchisee or prospective franchisee according to the results within 30 days from the date of such request for payment or return (Article 6-5(6) of the 「Fair Transactions in Franchise Business Act」 and Article 5-9(3) of the 「Enforcement Decree of the Fair Transactions in Franchise Business Act」).
- However, where the franchisee or prospective franchisee requests the return of his/her franchise deposit with the consent of the franchiser, the head of the depository shall return the franchise deposit to the franchisee or prospective franchisee within ten days from the date of such request (Article 6-5(7) of the 「Fair Transactions in Franchise Business Act」 and Article 5-9(4) of the 「Enforcement Decree of the Fair Transactions in Franchise Business Act」).