If a franchisee shuts down their store early, can the franchisor claim compensation?
In a case involving San Liang Pin Tea (Case 1), the franchisor counter-sued the franchisee for breaching the agreement by ending operations early, resulting in a loss of 30 months of expected profit totaling NT$350,000.
According to the franchise agreement:
“If the franchisee breaches this contract… the franchisee shall be liable for all resulting damages incurred by the franchisor.”
Between June and December 2019, the franchisor’s gross profit from product sales was:
NT$45,528,NT$18,225,NT$36,179,NT$25,398,NT$23,632, NT$11,732, andNT$3,282
totaling NT$163,976, which averages NT$26,881 per month.
Since the franchisee still had 30 months remaining in the contract term, the court calculated the franchisor’s lost expected profit as NT$351,960.
Final Ruling:
The court ruled in favor of the franchisor, ordering the franchisee to pay NT$351,960 in damages for the early termination.
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