A Temple City franchisee of Instagram-popular dessert chain SomiSomi is suing the brand for $450,000 in damages for allegedly violating two laws established by the state to protect franchise owners, namely the California Franchise Investment Law and the California Franchise Relations Act, and for the company’s alleged misuse of funds earmarked for marketing purposes, according to court documents.
Lauren Lim, the franchisee of the Temple City location, alleges in court documents that SomiSomi, whose offices are headquartered in Los Angeles’s Koreatown, unfairly terminated a five-year agreement signed by the two parties, set to expire in 2024. In addition, court documents allege that SomiSomi misrepresented the brand and its proprietary systems, including training materials and trade secrets, to Lim. The documents allege that SomiSomi collected 2 percent of sales from its nearly two-dozen franchises intended for marketing purposes, but less than 7 percent of collected funds were spent on advertising. The majority of the funds paid for personnel not connected to the SomiSomi brand, according to court documents. On March 22, a separate complaint was filed, alleging diversion of marketing funds to SomiSomi CEO Matt Kim’s other brands, including Sul & Beans, at the expense of SomiSomi franchisees.
Lim, along with her husband Daniel Hwang, opened the Temple City location on January 24, 2020. The shop was forced to close on March 17 due to state- and city-wide mandates to curb the spread of COVID-19. Lim saw an 80 percent decrease in sales when the store reopened toward the end of May. The lower volume made it financially difficult for her to purchase the new waffle machine required by SomiSomi and to participate in a chain-wide marketing campaign that honored first responders with free ice cream, according to court documents.
After months of tenuous correspondences between the two parties, Lim received a letter of termination in September 2020. According to court documents, SomiSomi alleged that Lim violated her contract by not completing the first responders marketing campaign and by failing to delete her store’s social media account, among other claims. The court documents also allege that SomiSomi did not provide Lim an opportunity to resolve any of the issues prior to terminating the contract. The legal complaint can be viewed in its entirety below.
Founded in 2016 by husband-and-wife team Matt and Woori Kim, SomiSomi captured the attention of Angelenos and their Instagram feeds with its signature Korean ah-boong — eye-popping fish-shaped waffles filled with colorful soft serve in flavors like black sesame, matcha, and ube. The chain also sells its soft serve in cups and cones, along with Japanese taiyaki (fish-shaped waffles stuffed with custard, sweet red beans, and other fillings). SomiSomi’s 19 locations in California, Hawaii, and Texas are largely operated by franchisees who pay a $39,000 franchising fee and an $8,500 training fee for the right to do so, according to the company’s website. SomiSomi also receives an ongoing 6.5 percent royalty fee on all franchise stores’ sales. The dessert chain’s rapid rise has been fueled in part by the popularity of Instagram food — culinary creations that are “over-the-top, intensely trend-driven, and visually arresting,” as Amanda Mull wrote for Eater.
While it is too soon to tell if the Temple City location’s less-than-stellar pandemic sales are any indicator of a demise for Instagram food’s popularity, Americans have shown a stronger preference for classic comforts like pizza, macaroni and cheese, and fried chicken sandwiches over more trend-driven dining throughout the pandemic.
Eater reached out to SomiSomi for comment and received the following response: “SomiSomi’s policy is that it does not comment on specific allegations of on-going litigation. SomiSomi is actively litigating the matter on all allegations.”
A court-ordered private arbitration panel will hear the complaint in the coming months and a hearing is scheduled for August to provide the judge a status update on the ongoing arbitration.