Franchise owner groups and the franchise industry are split over the passage of a revision to the Franchise Business Act (a partial amendment to the Fair Transactions in Franchise Business Act) in the National Assembly.
The revision to the Franchise Business Act guaranteeing franchise owners' bargaining rights passed the National Assembly's plenary session on the 11th. ▲ Introduction of a registration system with the Fair Trade Commission or provincial governors for franchisee organizations ▲ Imposition on headquarters of a duty to negotiate when a registered group requests talks ▲ Corrective orders if talks are not carried out are the key elements.
The National Council of Franchisee Associations and the People's Solidarity for Participatory Democracy (PSPD) said in a statement that they "warmly welcome the introduction of collective bargaining rights for franchisee organizations," adding, "It is meaningful that a foundation has been laid for franchise owners, who have struggled with unfairness and irrationality by franchisors and the economic downturn, to resolve issues through dialogue and compromise with headquarters."
Franchisee councils have argued that collective bargaining rights are a basic mechanism to allow owners to at least survive against unfair practices such as excessive designation of mandatory items, forced distribution margins, and refusal to renew contracts. They noted that franchisors rejected or did not respond to franchisee groups' requests for talks.
However, the Korea Franchise Industry Association said in a position paper, "We express serious concern over the passage of the Franchise Business Act revision in the National Assembly's plenary session," and "urge swift discussions on additional revisions to establish institutional measures to mitigate the bill's side effects."
The Franchise Industry Association argued that "because rules on securing representativeness and establishing a negotiation channel are lacking, the proliferation of multiple groups and abuse of the right to request talks will amplify conflicts within brands, ultimately leading to management contraction and a decline in franchise sales."
It emphasized that the requirements for multiple groups to request talks are overly broad and that there are no safeguards to prevent abuse of the right to request. It said it is concerned that franchisors will find it difficult to actively conduct business activities while responding to talks with multiple groups.