Ramya B 02 December 2023

Franchisor not refunding deposit amount and threatening for using brand name

Hi,

I am running franchise business.

I have made deposit amount of Rs. 3 Lakh each for franchise business to the Franchisor for two locations "X" and "Y".

I have started the business in "X" Location and after 2.5 years, the business was not suitable for me and raised concern with franchisor that the business was not suitable for me, they have not provided enough support and stated:

I am ready to transfer ownership of the "X" business to anyone that brand appoints and directs
Not ready to proceed further to start business in "Y" location and requested refund of Rs. 3 Lakh deposit ( I have made the deposit through RTGS and not signed any agreement)

Even after multiple follow up mails the Franchisor, they have not responded to any of the mail communication for Rs. 3Lakh deposit refund for "Y" location.

So, after 3 years post mail communication, I have decided to withdraw from the Franchisor (dropped mail to the franchisor team) and stopped Royalty payments.

In mail communication, I had stated that I am removing board names from my premises (shared pictures to the brand) and for complete removal of brand references in my bills and social media platforms, the franchisor should refund the deposit amount of "Rs 3Lakh" paid for "Y" location.

There was no response from the Franchisor to my mail for 2 years and so I have reinstated all the brand name in my premises.

Now, after 2 years the franchisor dropped mail stating that I am unauthorizedly using the brand names and I should pay the royalty for using the brand name.

I replied back, quoting all earlier mails and RTGS payment snapshot to them and stated that

Since, they have not responded to my mails for 2 years, I have reinstated all the brand name in my premises.
If they want to remove brand name from my premises, they should refund back my deposit amount for Rs. 3Lakh with interest.
I will not make payment for any Royalty in 2 years, since they have read my mails and not responded to it.

We appreciate your expertise and insights on the legal aspects of this matter. Your guidance will be invaluable in navigating this dispute.

Thank You.

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2 Replies

T. Kalaiselvan, Advocate (Advocate) 03 December 2023

You issue a legal notice to the franchisor demanding return of the deposit amount within seven days, failing which you may file a suit for recovery of money on the basis of the evidence of tranferring this amount through RTGS mode.

You may stop using their brand because that will not entitle you to claim refund

Ramya B 07 December 2023

Hi Sir,

Thanks a lot for your reply!

If I had removed the brand name, they would never respond me.

I have already sent them mails about my decision to withdraw from the agreement, removed board names from my premises (shared pictures of the same) to the franchisor and they should refund the deposit amount made for "Y". Even after 2 years, they did not respond to any of my mails.

Even now, in their mail they are asking royalty for using their brand name and have not mentioned a word about the deposit amount or my request for refund.

How should I proceed further. Till now, all the communications were only through emails and they have not called back or sent any letters to me.

Thanks again!.