On January 14, the Supreme Court 대법원 affirmed the lower court’s ruling that Pizza Hut must refund KRW 21.5b (USD 14.6m) in excess franchise fees. The 94 franchise owners who filed the lawsuit had alleged that from 2016 to 2022 the pizza chain charged additional fees for ingredients that were not included in the franchise agreement.
The result is almost certain to invite a wave of similar lawsuits. Franchise restaurants are the mainstay of South Korea’s small businesses. The country boasts more than twice as many fried chicken restaurants - almost all of which are franchises - as there are McDonald’s in the world. According to the Korea Fair Trade Commission 공정거래위원회, 61.5% of all franchises in South Korea charged franchise owners additional fees on the costs of ingredients.
The Korea Franchise Association 한국프랜차이즈산업협회, a trade group for franchise restaurants, decried the ruling as “potentially destructive of the entire industry,” arguing that fees on ingredients are standard business practice. Pizza Hut, which has been undergoing reorganization since 2024 amid financial struggles, could face liquidation as a result of the Supreme Court ruling.
