The Fair Trade Commission announced on the 13th that it had detected violations of the Franchise Business Act by B.I. Korea, the franchisor of Dunkin' Donuts, and imposed a penalty surcharge of 2.136 billion won along with a corrective order.
According to the Fair Trade Commission, B.I. Korea designated a total of 38 items, including sinks, donut displays, strainers, sandwich boxes, and display paper, as essential items and restricted franchisees to purchase them only through the headquarters.
The Franchise Business Act stipulates that for the designation of essential items to be lawful, it must be ▲ essential for the management of the franchise business, ▲ necessary for trademark protection and maintaining product consistency, and ▲ must be disclosed in advance through an information disclosure statement. However, the Fair Trade Commission determined that the 38 essential items designated by B.I. Korea have no direct relation to the taste and quality of Dunkin' Donuts products, and there is insufficient objective evidence that they are essential for franchise management.
The Fair Trade Commission noted, "B.I. Korea excessively restricted the autonomy of franchisees' choice," adding, "Considering that other franchisors in the same industry operate items designated by B.I. Korea as 'recommended items,' B.I. Korea's actions are inconsistent with general transaction practices."
B.I. Korea has been found to still maintain 4 of the 38 items, including strainers, as essential items. In response, the Fair Trade Commission issued a cease-and-desist order to revoke the designation of those items as essential.
Additionally, the Fair Trade Commission uncovered allegations that B.I. Korea falsely prepared the 'document on nearby franchise status' that it is required to provide to prospective franchisees. According to the Franchise Business Act, franchisors must accurately provide the status of the 10 closest franchises to help prospective franchisees carefully consider opening a store. However, B.I. Korea was found to have omitted nearby franchises and included franchises located further away, hindering the decision-making process of franchisees. In this regard, the Fair Trade Commission issued a warning.
A Fair Trade Commission official stated, "This action is aimed at improving practices that unfairly impose essential items on franchisees by franchisors," and added, "We will continue to strengthen monitoring to protect the rights of franchisees going forward."