The Korea Franchise Association demanded comprehensive revisions to the enforcement decree and newly established notice for the amended Fair Transactions in Franchise Business Act set to take effect at the end of the year, saying they could fuel conflict and disputes rather than increase communication between headquarters and franchisees.
Na Myeong-seok, president of the Korea Franchise Association, said at a press briefing held on the 8th at the association's main conference room in Yeongdeungpo District, Seoul, that the government's enforcement decree is highly likely to undermine the purpose of the law, and strongly urged comprehensive revisions reflecting on-the-ground views.
The association flagged four issues: ▲ group registration requirements ▲ scope of consultation topics and grounds for exclusion ▲ third-party participation ▲ restrictions on renegotiation.
The government plan allows a group joined by at least 10% of all franchisees and with at least 30 members to request consultations with the franchisor. The association pointed out that if the 10% threshold stands as proposed, up to 10 registered groups under a single brand could demand negotiations with headquarters.
The association argued the registration requirement should be raised to at least 40% to ensure representativeness. It said that while opinions would be compiled and merely notified, there is no clause requiring the inclusion of nonmember franchisees' views, adding the process could become a formality.
It also cited as a problem defining the scope of consultations as all statutory entries in franchise agreements. That is because sensitive information directly tied to a brand's core strategies—such as outlet expansion strategy, new products, and pricing methods—could be swept into the consultation agenda. Although the government plan excludes demands that would undermine brand uniformity or constitute unjust management interference, the association called for a specific, itemized list of consultation topics and exclusions.
Another sticking point is a rule allowing a person who lawfully represents the parties, in addition to headquarters and franchisees, to attend consultations. The association argued that participation by third parties other than authorized agents with proven contractual relationships, such as attorneys, should be restricted.
The association also called for extending the renegotiation period. It said the current government plan of 180 days for the same topic and 60 days for a different topic should be increased to one year and 90 days, respectively. In particular, because advertising and promotional agreements are tied to annual strategies, it argued the renegotiation period for the same topic should be one year. It also warned that, for different topics, if multiple registered groups split up their requests, consultations could become effectively constant.
Na said the industry had concerns about the government's draft in June but engaged in good faith out of respect for the intent of the system and waited for a balanced plan, adding that the contents of the notice have instead worsened and there was insufficient prior consultation and explanation. The association plans to propose comprehensive revisions to the enforcement decree at a meeting with Fair Trade Commission Chair Ju Biung-ghi on the 11th.
The association also decided to introduce a certification program within the year for member companies that have implemented win-win and ethical management, to prevent unfair practices by a few franchise brands from leading to industrywide regulation. Na said it is heartbreaking that the abusive behavior of a select few brands is being used to frame about 10,000 franchisors, adding that it will continue training for headquarters chief executive officers (CEOs) and others.