February 25, 2025 Copyright ©️ 2025 by goldkeen International Patent & Trademark Joint Office
If you're looking to grow your brand through franchising, what should you include in the contract to effectively encourage franchisees to renew?
It’s a tough question with no easy answer.
Let’s be real: If the business is profitable, why wouldn’t the franchisee renew?
A franchisee enjoys many benefits:
A reliable supply chain, efficient logistics, a full marketing plan, and a professionally designed CIS (Corporate Identity System)…
But once they subtract rent, payroll, utilities, and raw material costs,
if the actual profits don’t match what they originally calculated at signing,
they may simply choose not to renew, rebrand, or run the business under a new identity.
During the peak of the pandemic, there were five vacant storefronts up for rent in Feng Chia alone—a stark reminder of the realities.
We’ve previously shared the case of a former Cama Café franchisee who rebranded to UNO Café and was ordered to pay NT$1.5 million in damages.
In this post, let’s take a look at how Tai Cha No.1 (台茶一号) structured their franchise agreement:
- “Within two years after termination of this contract, Party B (the franchisee) may not, without written consent from Party A (the headquarters), engage in, invest in, be employed by, or in any way participate in or advise a third party on the operation of a similar business.”
- “If Party B violates any of the provisions set out in Articles 12 through 14, they must pay Party A punitive damages of NT$500,000 and compensate for any losses suffered by Party A...”
In this case, the former franchisee did not renew and was found six months later running a similar tea business under the name “Pin Cha Fang”,
with store décor using the same blue-green color palette closely resembling Tai Cha No.1.
The court ultimately ruled that the former franchisee must pay NT$250,000 in damages.
Fortunately, the amount was reduced due to mutual agreement on the fact that the former franchisee never broke even, and thus the penalty was adjusted.
As the saying goes:
“All happy families are alike; each unhappy family is unhappy in its own way.”
And from franchise disputes, we can learn a wealth of legal insights.
If you're planning to develop your own franchise system—
now’s the time to start thinking seriously about your contracts.
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