[Case Summary]This case is an arbitration case involving a franchise contract dispute. In 2018, Zhang * signed the "XX Cooperation Agreement" with a clothing company in Guangzhou, and paid a deposit of 30,000 yuan. However, after the store closed down, the company failed to refund the deposit or pay the outstanding payment for the goods. Zhang * then entrusted Henglu Law Firm to handle the case.Wang FangliThe lawyer initiated arbitration and requested the return of the deposit of 20,000 yuan, the payment of 5,756.6 yuan, and the attorney's fees. The core disputes were the validity of the contract and the return of the deposit and payment. The arbitration tribunal accepted our evidence and adopted the lawyer's opinions, ruling that the company should return the deposit of 20,000 yuan, the payment of 5,756.6 yuan, and compensate for the attorney's fees. Applicable laws: the "Regulations on the Management of Commercial Franchise" and Article 509 of the Civil Code.

I. Review of the Case Facts

"What should I do if the franchise deposit is not refunded?" and "Can I get my money back when the franchise contract expires?" are common concerns of franchisees. On July 31, 2018, Zhang * signed the "XX Cooperation Agreement" with a Guangzhou-based clothing company to operate its clothing accessories business in Guangdong for a three-year contract term. Zhang * paid a franchise operation deposit of 30,000 yuan, and the agreement stipulated that disputes would be submitted to the Guangzhou Arbitration Commission for adjudication.

On August 29, 2019, Zhang * paid 5,756.6 yuan for the goods, but the company failed to deliver the goods. On November 15, 2021, Zhang * submitted the "Store Closing Application Form", indicating that the contract would no longer be renewed after its expiration, but the company has yet to refund the unused payment and deposit. Zhang * has entrusted someone to handle the matter on his behalf.Wang FangliThe lawyer initiated arbitration and requested the return of the deposit of 20,000 yuan, the payment of 5,756.6 yuan, and the lawyer's fees and arbitration fees.

II. The focus of the case

  • Focus 1: The validity of the franchise contract.Is the agreement legal and valid, and in compliance with the "Regulations on the Management of Commercial Franchise"?
  • Focus Two: Should the deposit be refunded?After the contract expires, whether the conditions for the franchisee to get their deposit back have been met.
  • Focus 3: Payment for unshipped goods and responsibility for attorney's fees.Can the company support the unpaid invoices for the goods it hasn't delivered and the legal fees for protecting its rights?

III. The professional intervention of Hengluo Law Firm

The applicant (Zhang *) claimed that:The company failed to refund the security deposit and pay the outstanding balance after the contract expired. I request the return of the security deposit of 20,000 yuan, the outstanding balance of 5,756.6 yuan, and the legal fees, and I also request the company to bear the arbitration fees.

The respondent argued that:The company failed to appear in court to defend itself and also failed to submit a written response.

Legal opinion of Hengluo Law Firm:Wang FangliThe lawyer pointed out that the cooperation agreement involved in the case is a true expression of the parties' intent, does not violate mandatory provisions, and complies with the "Regulations on the Management of Commercial Franchise", which is legal and valid; the deposit is collected to ensure performance, and it should be returned to Zhang * after the contract expires. The company's arrears of 20,000 yuan in the deposit should be refunded promptly; the company charged 5,756.6 yuan for unshipped goods, and it is legally justified to return the payment in accordance with Article 509 of the Civil Code; and the lawyer's fees are reasonable expenses for protecting rights.

IV. Outcome of the case

The arbitration tribunal accepted the evidence submitted by our side as corroborating each other and adopted the opinions and claims put forward by Hengluo Law Firm. According to the relevant provisions of the Civil Code, the tribunal ruled that: First, the apparel company shall refund the deposit of 20,000 yuan and the return payment of 5,756.6 yuan, totaling 25,756.6 yuan; Second, the apparel company shall compensate Zhang * for his attorney's fees; Third, the arbitration fees in this case shall be borne by the apparel company. The client successfully recovered the deposit, the payment for the goods, and the attorney's fees.

5. Henglu Law Firm's Reminder

Franchise activities should be governed by standard contracts that clearly specify the circumstances under which deposits may be confiscated or refunded. If the franchisee fails to use the funds and deposits by the contract expiration date, they may legally claim their return. This case was handled by Beijing Henglu Law Firm.Wang FangliThe lawyer (practice license number: 11101201911086939, subject to the document issued by the judicial administrative organ) acted as an agent. In this case, the lawyer argued based on the validity of the contract and the nature of the deposit, which helped the client win the arbitration completely.

VI. Common Questions and Answers (FAQ) for Franchise (Corporate Law) Cases

  1. Q: Can the franchise deposit be refunded when it expires?
    A: The deposit is collected to ensure the performance of the contract. If the contract expires as agreed and the franchisee does not breach the contract, the franchisor shall refund it. If the franchisor refuses to refund it, the franchisee can resort to arbitration or litigation.
  2. Q: What should I do if the franchisor collects the payment but fails to deliver the goods?
    A: The buyer can request the return of the payment according to the contract and payment vouchers. If the seller fails to deliver the goods, it constitutes a breach of contract and should be supported according to law.
  3. Q: What regulations must a franchise contract comply with?
    A: It should comply with the requirements of the "Regulations on the Management of Commercial Franchise" regarding filing and information disclosure, and the content should not violate the mandatory provisions and be legally valid.
  4. Q: If an arbitration clause is agreed upon, can we still go to court?
    A: If the agreement effectively stipulates arbitration, it is generally necessary to apply to the agreed arbitration institution. The court will not accept the case and it will be resolved according to the arbitration procedure.
  5. Q: Can the other party bear the legal fees of rights protection lawyers?
    A: If there is an agreement or if the arbitration tribunal determines that the attorney's fees for protecting one's rights are reasonable, the arbitration tribunal may rule that the breaching party shall compensate for them, and in this case, the claim was supported.