Mega Coffee Franchisees Raise Fee-Reclaim Suit to 61.7 Billion Won

Mega MGC Coffee franchisees have raised their claim against headquarters MGC Global to roughly 61.7 billion won, escalating a wave of lawsuits over hidden differential franchise fees that started with Pizza Hut's landmark win in January.

Law Firm Doa, representing the owners, filed an application to change the claims on the 6th, according to the franchise industry on the 19th. The suit now covers 290 owners running 317 stores — an average of 212.85 million won per owner and about 194.72 million won per store.

How did the Mega Coffee suit grow?

The plaintiffs filed the unjust-enrichment claim in April, initially seeking around 100 million won per person. They raised the figure after securing additional supporting materials. The plaintiff group was trimmed from 323 people in April to 290 after some withdrew suits or had joint-operation relationships that overlapped claims. Doa says the timing for any additional complaints remains undetermined.

Hundreds of billions of won in claims are piling up across other brands. Owners of 201 Mom's Touch outlets demand about 49.8 billion won back and clashed with headquarters over the submission of cost data at the first hearing in August. Zico Ba owners, 72 of them, raised their claim from an initial 720 million won to roughly 10.27 billion won. Franchisees of Du Jjim, BBQ, Gupne Chicken, bhc and Baskin-Robbins have all sued their headquarters for the return of differential franchise fees. Industry watchers expect Zico Ba Chicken to draw the second first-instance ruling on the issue.

Why did the floodgates open?

Differential franchise fees are the margin above the appropriate wholesale price that franchisees pay for products and materials supplied by the franchisor. The industry long treated the practice as a customary distribution margin. That changed in January, when the Supreme Court confirmed a partial victory for Pizza Hut franchisees.

The court ruled the fees constituted unjust enrichment because the Korea Pizza Hut contract never explicitly stated them and no specific agreement existed. The return amount was calculated using factors including the ratio of differential franchise fees to sales recorded in the franchise disclosure document.

What will decide the Mega Coffee case?

Explicit agreement is the crux. The owners argue their contracts contained no separate provisions on differential fees beyond a monthly royalty of 150,000 won. MGC Global counters that an implicit agreement was reached through the disclosure document, an amended contract and continuous transactions. Even if return liability is recognized, the calculation period and method are expected to become contested issues.

The stakes scale with the brand. Mega Coffee's store count passed 4,500 this month, so an adverse ruling could trigger a line of additional lawsuits from owners who haven't yet sued.

Franchise companies are watching each subsequent ruling for guidance, but the industry pushes back on the idea of automatic contagion. One franchise industry official said: "The situations for Pizza Hut and other food service brands are all different," adding, "I understand that individual trial panels are looking at each brand's situation rather than simply following the Pizza Hut ruling." The next rulings — Zico Ba's expected among them — will show whether January's precedent spreads or stays contained to contracts that stayed silent on the fees.