March 26, 2024 Copyright ©️ 2024 by JinRui International Patent & Trademark Joint Office

A former Cama Café franchisee switched to operating under the UNO Café brand and was ordered to pay NT$1.5 million in damages!

In this case, a former franchisee of Cama Café terminated the franchise agreement and started operating a café under the UNO Café name. This led to a legal dispute, and the court ruled that the owner of UNO Café must compensate Cama Café with NT$1.5 million. Here’s why:

  • The franchisee had signed a clause in the agreement stating:“During the term of this agreement, and after its termination or cancellation, Party B shall not operate or solicit franchises using any business model that is the same as or similar to that of Party A (Cama Café).”
  • Since UNO Café’s business model was deemed similar to that of Cama Café, this was a breach of contract.

The “Break-Up Clause” in Franchise Agreements Is Crucial

  • If you’re planning to start a franchise and expand into a chain, your franchise contract should include a well-drafted break-up clause. This clause should cover:
  • ‧ A prohibition on using the franchisor’s same or similar business model after the agreement ends.
  • ‧ A penalty clause for breaching the break-up terms.

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