November 21, 2024 Copyright ©️ 2024 by goldkeen International Patent & Trademark Joint Office
 

Is it okay to pretend to join a franchise to learn the technology and then back out later?

Be careful — you could be fined NT$1,000,000 in breach of contract penalties!

 

"The Temptation of Devil’s Island: A Franchise Cautionary Tale"

In a quiet town in Changhua County, there sat an empty storefront. It was supposed to become a new branch of Devil’s Island World Fried Chicken. But before its grand opening, the dream collapsed before it even began.

This franchise dispute began with a deal between two men.

The plaintiff? The head office of Devil’s Island World Fried Chicken.
The defendant? Mr. Hsieh Meng-Cheng, a prospective franchisee.
On October 4, 2021, both parties signed a franchise agreement for Mr. Hsieh to open a store in Changhua.

According to the contract, Mr. Hsieh was required to follow the company’s rules, including sourcing meat from their designated suppliers. However, after completing the official training, he refused to comply. On October 27, just weeks later, he unilaterally terminated the contract.

The company saw this as a clear breach and filed a lawsuit, demanding NT$1 million in damages.

In court, Mr. Hsieh argued that the franchisor had failed to fully disclose information before signing and hadn’t given him enough time to review the agreement. He also claimed that subletting the storefront to him violated the terms.

But after a detailed review, the court ruled in favor of the franchisor. It found that the company had met its obligations in providing disclosure and time to review. As for the sublet, the court ruled it didn’t breach any existing lease terms with the landlord.

The result: Mr. Hsieh was ordered to pay NT$1 million in damages.

Epilogue

Unwilling to accept the outcome, Mr. Hsieh appealed to the High Court. There, he raised a new argument—claiming that the NT$1 million penalty was unreasonably high and fundamentally unfair.

The High Court agreed, reducing the penalty to NT$120,000.

This case serves as a powerful reminder:
Before you franchise, review your agreements carefully.
Understand the obligations, both spoken and unspoken.
What seems like a good opportunity can quickly become a costly mistake.

 

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