Korea franchise association seeks overhaul of proposed 10% negotiation threshold

  • Korea Franchise Industry Association demanded revisions to the proposed franchise consultation decree.
  • A 300-store franchisor could incur at least 43 million won in additional annual costs.
  • The association will present recommendations on the 11th and submit a formal opinion by the 14th.

The Korea Franchise Industry Association is urging the government to revise a proposed enforcement decree for the revised Franchise Business Act, which takes effect on December 31. The draft would let a franchisee association register with support from at least 10% of franchisees using the same brand, subject to a minimum of 30 members, or with at least 1,000 franchisees. Registered associations could request consultations on transaction terms and other matters, and franchisors could not refuse without justifiable cause; violations could trigger corrective orders from the Korea Fair Trade Commission. The association says the threshold could produce competing groups with conflicting demands and exclude brands with fewer than 30 stores. It wants a 30% to 40% threshold, a single consultation channel, clearer limits on subjects and third-party participation, emergency procedures and longer intervals between repeat consultations. It estimates that a 300-store franchisor could face at least 43 million won, or about $32,000, in additional annual costs, with the system potentially reducing operating profit by 7% to 8% at franchisors with 300 or fewer stores. The Korea Fair Trade Commission is considering changes after criticism that the 30-member minimum disadvantages small brands, and plans to finalize the decree within the year after the notice period ends on the 14th.

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