If a franchise store doesn’t place any orders for a month,
can the franchisor demand NT$10,000 per month in penalty?
There was once a case involving the brand “Hungry Power Handmade Pressed Sandwich.”
The franchise agreement stated:
“A minimum monthly order amount of NT$5,000 is required. If no raw materials are ordered for over a month, a reason must be reported to headquarters. If no reason is reported and no orders are placed for an entire month, a fine of NT$10,000 will be imposed to the headquarters.”
The contract also stipulated:
“If the franchisee terminates the contract early without cause, the headquarters has the right to confiscate the security deposit. In addition, the penalty will be calculated at three times the monthly proportion of the franchise technology transfer fee, which is NT$300,000, and the food service equipment such as a four-door refrigerator and single-door refrigerator will be reclaimed by the headquarters (to be returned by the franchisee).”
Since the contract takes effect by mutual agreement between both parties,
even though the franchisee and headquarters parted on bad terms,
the court still ruled that the franchisee must compensate the headquarters with NT$130,000.
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