[비즈한국] It has been reported that Mega MGC Coffee (Mega Coffee) franchisees, who filed a lawsuit against MGC Global for the return of excessive franchise fees, are preparing additional legal actions. As a result, the legal dispute between the franchisees and the headquarters may escalate into a series of lawsuits. Attention is also focused on the potential impact on future cost burdens and business operations.
Franchisees File Lawsuit Against MGC Global for Return of Excessive Franchise Fees
The conflict between Mega Coffee franchisees and the headquarters is escalating from a simple dispute into a full-scale legal battle. Recently, 323 Mega Coffee franchisees filed a class-action lawsuit against the headquarters, MGC Global, demanding the return of excessive franchise fees. The franchisees are seeking a refund of 1 million won per person. They base their claim on the Supreme Court ruling in the Korea Pizza Hut excessive franchise fee case delivered last January, arguing that franchise fees collected by the headquarters without prior agreement constitute unjust enrichment without legal justification.
With the possibility of further lawsuits being raised, the conflict shows signs of entering a prolonged phase. According to Bizhankook's coverage, the franchisee side is confirmed to be preparing at least two additional lawsuits separate from the current franchise fee case. Law Firm Do-a, representing the Mega Coffee Franchisee Association, stated, “Future lawsuits will also focus on claims for the return of unjust enrichment. We are considering expanding to other issues beyond the existing legal principles regarding franchise fees.”
The trend of conflicts with franchisees escalating into a series of lawsuits is highly likely to act as a burden on Mega Coffee’s overall business. Because the franchise model relies heavily on trust between the owners and the headquarters, shaken confidence could hinder new store openings and affect the stability of existing store operations. Analysts suggest that if the lawsuits are prolonged or expand in scale, concerns over financial burdens and business sustainability could grow.
In this situation, MGC Global’s active participation in the bid to acquire Homeplus Express also draws attention. MGC Global expressed its intent to participate by submitting a Letter of Intent (LOI) for the Homeplus Express preliminary bid, which closed on March 31. However, the industry is questioning the appropriateness of pursuing a large-scale acquisition amid escalating legal disputes with franchisees.
The concern is that simultaneous expansion into new businesses while conflict deepens with franchisees—who are core stakeholders in the franchise-based business structure—could potentially destabilize the business foundation. It is also pointed out that if the litigation drags on or grows, the resulting additional cost burden could serve as a negative factor in the acquisition bid.
Beyond Coffee into Retail Amid Expansion Limits
The market evaluates the recent legal dispute as bringing long-standing conflicts with franchisees to the surface. MGC Global has had repeated conflicts with franchisees in the past. In 2016, controversy arose when the company passed on commissions to franchisees without their consent upon the introduction of mobile gift certificates. As a result, it is known that franchisees bore approximately 270 million won in commissions between 2018 and 2019. It was also confirmed that the headquarters received rebate-like profits from gift certificate issuers during this process.
Furthermore, the designation of ice makers and coffee grinders as mandatory items since the end of 2019, with margins of 26-60% applied through the headquarters, has also come under scrutiny. The practice of having the headquarters and franchisees split the cost of promotional events has also been identified as a factor in the conflict. Regarding these transactions, the Fair Trade Commission imposed a fine of approximately 2.3 billion won last year.
Against this backdrop, concerns over slowing growth have been added. The domestic low-cost coffee market has already reached saturation, making the growth strategy focused on store expansion clearly limited. Mega Coffee currently operates around 4,200 stores, ranking first in the number of stores among domestic coffee brands. However, analysts say that additional growth potential is limited due to intensifying competition.
MGC Global recorded 646.9 billion won in revenue and 111.4 billion won in operating profit last year. While the company grew in size, with revenue up 30.4% and operating profit up 3.5% year-on-year, profitability slowed as the operating profit margin fell to 17.2% from 21.7% the previous year.
MGC Global has recently been accelerating efforts to secure new growth engines, such as overseas expansion. It entered Mongolia in 2024 and currently operates 8 stores, and it signed a partnership with Cambodia last year. It is reported that entries into the Japanese and US markets are also being prepared.
However, as the domestic franchise business remains the foundation of overall profits, restoring relationships with franchisees is considered a major task, as stability in these relations is directly linked to the sustainability of the overall business.
Regarding this, an MGC Global official stated, “To promote mutual growth with franchisees, the headquarters covers more than half of advertising and promotional expenses, and all costs are executed transparently according to mutually agreed standards,” adding, “We will continue to strive to ensure greater benefits return to our franchisees. We will achieve sustainable growth through cooperation with customers and franchisees and continue to strengthen our brand value.”