Japan Souichirou Kozuka Sophia University Tokyo JAPAN Souichirou
- Slides: 10
Japan Souichirou Kozuka Sophia University, Tokyo JAPAN - Souichirou Kozuka 1
Franchising in Japan 1200+ franchisors, 235. 000 outlets | JFA member: 254 franchisors | Sales 20. 3 trillion yen (203 billion Euros) | Two types of networks | – Convenience stores: individual franchisees, strong control by the franchisor – Restaurants: large franchisees, often joining more than one chain JAPAN - Souichirou Kozuka 2
Franchising legislation in Japan Medium-small Retail Business Promotion Act (MSBRP): disclosure law | Disclosure items provided by Ministerial Order: Main points of the franchise agreement plus information about the franchisor | Applicable only to retail franchising | Protection of SMEs – applicable when half of the franchisees are SMEs | JAPAN - Souichirou Kozuka 3
Competition law: JFTC Guidelines of 2002 serves as the second franchising legislation | Disclosure + some relationship regulations | Open list of disclosure items | Abuse of dominant position; tie-in; retail price maintenance | Applicable to all kinds of franchising | Cease and desist order, injunction by parties | JAPAN - Souichirou Kozuka 4
Self-regulation Disclosure format by Japan Franchise Association (JFA) | Satisfying both MSBRP and JFTC Guidelines | Mandatory on all members (expanding the scope of legislative regulation) | JAPAN - Souichirou Kozuka 5
Nature of franchise agreement SC 4 July 2008 | “Open account” in a franchise agreement of convenience stores | Nature of that part of the agreement: mandate (franchisee mandates franchisor to carry out accounting and settlement) | Duty of reporting derived from the Civil Code | Disclosure of payment details ordered | JAPAN - Souichirou Kozuka 6
Interpretation of franchise agreement SC 11 June 2007 | Calculation of franchise fee under a franchise agreement for a convenience store | Whether the purchase price for goods disposed of by the franchisee is included in “sales” | Definition in the manual prevailed | Textual interpretation – consistent with SC 2008 (requalification by the Court)? | JAPAN - Souichirou Kozuka 7
Termination of franchise agreement Usually definite term is provided | General rules for a continuing contracts: grave reason is required for termination? (no SC case but lower courts tend to affirm) | Tokyo DC 25 Jan. 2005: failure to provide deposit plus repeated delay in payment of royalties found to have destroyed relationship | No right of indemnity | JAPAN - Souichirou Kozuka 8
Practical tip for termination Tokyo DC 21 Feb. 2006 | Repeated failure to pay royalties, unreported borrowing from a nonbank with high interest rate, substandard quality of service | Warning, followed by suspension upon MOU three times (for three years) | Termination justified as relationship found to have been destroyed, no abuse affirmed | JAPAN - Souichirou Kozuka 9
Case law on disclosure Application of disclosure law (MSRBP) does not preclude the development of case law | Duty of franchisor to provide accurate information before concluding an agreement | Earnings claim: not included in the disclosure items under MSRBP but often disputed later | Unreasonable assessment makes the franchisor liable (eg CA Fukuoka 31 Jan. 2006) | JAPAN - Souichirou Kozuka 10
