The company Hanam F&B, operating the pork restaurant brand 'Hanam Pig House,' has been imposed a penalty surcharge for unjustly halting the supply of goods and improperly terminating a contract.
The Fair Trade Commission imposed a penalty surcharge of 80 million won and a corrective order on Hanam F&B on the 17th for allegedly violating the Fair Transactions in Franchise Business Act.
According to the Fair Trade Commission, Hanam F&B designated 26 items, including kimchi and somyeon, as essential items that were not specified as mandatory in the information disclosure statement and franchise agreement during the contract signing process with the franchisee at branch A in March 2015 and March 2016. Subsequently, the franchisee restricted transactions, requiring that these products be purchased only from specific businesses.
According to the Franchise Business Act, for the headquarters to legally designate essential items, those items must be essential for the management of the franchise business. Additionally, they must be necessary to protect trademark rights and maintain product identity. Furthermore, the franchise agreement must be signed after informing these requirements through the information disclosure statement.
However, Hanam F&B initially did not include the 'possibility of additional essential items' in the information disclosure statement and franchise agreement. Beyond notifying the informant of the fact that 'essential items had been added' through certified mail, the franchisee did not enter into a new franchise agreement with the added essential items.
Hanam F&B suspended the supply of meat to branch A starting from October 5, 2021, because the franchisee did not purchase the items designated as essential. When the franchisee had no choice but to procure meat, Hanam F&B terminated the franchise agreement in February 2022, citing a violation of the prohibition against branch purchases.
The Fair Trade Commission stated that it 'severely reprimanded the act of forcing the purchase of essential items, and the cessation of supply or termination of contracts for goods necessary for conducting franchise business without just cause.'
It added, 'To protect the rights of franchisees, we will continuously monitor unfair practices by the headquarters,' and noted, 'If violations of the law are confirmed, we will take strict action.'