Court orders BBQ to pay W 200 mil. to BHC

Two fried chicken franchises, BBQ and BHC, which were formerly one company have multiple ongoing legal disputes over undue service fees and trade secret piracy./ Courtesy of BHC

By Jung Hae-myoung

The Seoul High Court ordered the country's leading fried chicken franchise operator BBQ to pay the unpaid price of goods to BHC, Thursday.

The ruling came after the two domestic rivals in the fried chicken industry have been battling each other over liability for breach of trust involving the specifics of allegedly agreed business contracts.

In 2013, the two companies signed an agreement under which BHC would supply seasoning products for fried chicken such as sauces and powder to BBQ, and handle the distribution of the meat and sauce for BBQ franchises. BHC claimed BBQ has not fully paid the service fees for the production and distribution of the products from May to December 2014, and asked the company to pay 763 million won including interest.

The agreed contract calls for the companies to cut the prices if the operating profit to sales ratio for goods and logistics goes over 19.6 percent and 15.7 percent, respectively. BBQ claimed that operating profit to sales ratio for the goods and logistics of BHC have recorded 21.71 percent and 16.93 percent, and it has paid more than it should to BHC.

The first trial of the lawsuit focusing on apprizing the exact operating profit to sales ratio was held in 2013. The appraisal concluded the ratio for product was 20.62 percent and logistics was 16.93 percent. The two companies appealed it after the price appraisal at the first trial, where BHC claimed the operating profit to sales ratio was set too high, and BBQ saying it was set too low.

At the second trial the appeals were rejected, saying “the appraisal does not seem too unreasonable or unfair.”

BBQ and BHC, formerly one company, have been locked in various legal battles ever since BBQ sold BHC to Rohatyn Group, a U.S.-based investment fund management company.

These two companies have been involved in other legal tussles on the matter of product service fees, logistics service fees and trade secret piracy. In April 2017, BBQ canceled the logistics service contract with BHC.

“We see BHC has broken into our information network and took our trade secret data,” an official at BBQ explained. “After restoring the data with digital forensics, we found a vast amount of information was stolen.”

The lawsuit on trade secret piracy will begin March this year, and the compensation lawsuit that BBQ raised against BHC will follow on the same day.