Mr. A was running a famous gomtang restaurant when he received a proposal from a friend to jointly run a gomtang restaurant in another location. After reviewing various factors, Mr. A decided that it would be realistically difficult to run two stores, so he decided to close the current store and open a new store in another location. Fortunately, the current store was so famous that he was able to find someone willing to take over soon after.
In this case, what should Mr. A keep in mind when transferring the store? Below, we will summarize the things that can generally arise in relation to the transfer of a store, and finally, we will look at the things that Mr. A should keep in mind.
If you do not plan to operate additional stores
First, if you do not plan on running the store any longer and want to receive as much key money as possible, it is a good idea to separately calculate the value of not only the furniture and interior, but also the existing store name, list of business partners, existing blog or homepage, phone number, recipes, etc. and include them in the key money.
Furthermore, it is a good idea to give trust to the person taking over the store by promising not to operate the same business for a considerable period of time. The other party will trust your meticulous consideration and will be willing to pay a little more in key money.
At this time, you should be careful because there is a possibility that you will not be able to operate even the business that may be in competition with the transferred store. This is because the Supreme Court prohibits even the business that may be in competition with the transferred business when considering various circumstances such as the content, scale, method, and scope of the business. [Supreme Court 2015. 9. 10., Decision, 2014Da 80440, Decision] Therefore, in order to avoid disputes, it is a good idea to state in the contract the business you intend to operate and clearly state that there is no problem in operating it.
If you plan to operate a similar store
Next, if you plan to continue operating in a store other than the current one, you must make it clear that you are only transferring the existing facilities, such as furniture and interior, and the geographical advantage (floor rights) of the current store.
In particular, it is important to keep your existing phone number and recipes, etc., and not hand them over. This is because there are frequent cases where you hand over your phone number as a favor and then are unable to operate your store due to the non-compete clause in the Commercial Act.
Furthermore, if it is possible to draw up a transfer contract, specifying that it is a simple transfer of equipment and facilities and not a transfer of business is a shortcut to preventing future disputes.
In Mr. A's case
In Mr. A's case, he is thinking of transferring the current store and operating an additional store somewhere else. Therefore, it is better to calculate the value of the current store furniture and floor rights and transfer it, and not hand over the customer list and recipes.
If the other party wants to take over the customer list, recipes, and employment relationships with employees, it is necessary to calculate the royalty amount by sufficiently reflecting such values, and when writing the assignment contract, insert a clause stating that the same business can be operated anywhere.
Lastly, if you want to do business in an area outside of the city/county/county where your existing store is located or the adjacent city/county, it is more advantageous to transfer your customer list, recipes, employment relationships, etc. In this case, since the customer list, etc. are included in the transfer target, the amount of the key money increases, but the Commercial Act does not prohibit operating the same type of business in an area outside of the same or adjacent special city/metropolitan city/city/county.
Attorney Sunjin Kim has been mediating franchise disputes based on coexistence for the past 10 years and is working to restore the franchise to its original state. KLF handles nearly 100 franchise lawsuits every year and is Korea's top franchise-specialized law firm that serves as an advisor to several franchise companies.
KLF Franchise Law Firm Room 205, 2nd floor, 151 Seochojungang-ro, Seocho-gu, Seoul 02-738-9600
