Frank F&B, which operates the handmade burger franchise brand "Frank Burger," was hit with about 640 million won in penalty surcharges by the Fair Trade Commission on allegations of abuse of power for providing false and exaggerated revenue information to franchise owners and forcing the purchase of certain items.
The Fair Trade Commission said on the 2nd that it imposed a corrective order and a 641 million won penalty surcharge after confirming that Frank F&B, the operator of Frank Burger, violated the Franchise Business Act.
An investigation found that Frank F&B provided prospective franchisees with a franchise guide containing projected revenue information inflated beyond reality for about a year starting in Jan. 2021.
Even though the monthly average sales of 13 stores actually stood at 33 million won, the company suggested that monthly sales of 40 million to 80 million won were possible based only on four months of data from one location in Mok-dong.
It also exaggerated the profit margin by including delivery fees in sales but excluding them from expense.
Along with this, Frank F&B was also caught forcibly selling 13 items, including forks and knives, that did not need to be purchased from headquarters. In this process, it was found to have reaped about 140 million won in unjust gains.
It was also confirmed that in May 2023, the company made owners shoulder part of the expense for a giveaway promotion held during a new menu launch without their consent.
By type of violation, the Fair Trade Commission imposed penalty surcharges of 175 million won for providing false and exaggerated information and 466 million won for acts that bound transaction counterparts.
The Fair Trade Commission said, "This sanction has significance in that it supports the rational decisions of aspiring entrepreneurs and prevents economic damage while establishing a fair and transparent franchise market order," adding, "By sanctioning a franchisor's excessive designation of mandatory items, it is expected to reduce owners' unnecessary burdens."