BR Korea, which operates the Dunkin donut franchise brand, lost a lawsuit after making franchisees buy items such as trays and display cases only through headquarters. Because the court found that franchisees' right to choose suppliers should be respected, attention is on whether similar disputes will increase in the franchise industry.
According to legal sources on the 11th, the Seoul High Court on the 24th of last month sided with the Korea Fair Trade Commission (Korea Fair Trade Commission (FTC)) in BR Korea's suit to cancel a corrective order and a penalty surcharge payment order.
In March 2025, the Korea Fair Trade Commission (FTC) imposed a corrective order and a 2.136 billion won penalty surcharge on BR Korea, saying it excessively restricted franchisees' choices by designating 38 items—including trays and display cases to hold donuts and sandwich boxes—as mandatory items.
Under the amended Franchise Business Act implemented in Jul. 2024, a franchisor must list in the franchise contract as mandatory items any goods that must be purchased from a specific supplier to maintain brand uniformity. The aim is to prevent franchisors from forcing franchisees to buy items that the headquarters does not need to procure.
If the ruling is finalized, BR Korea must carry out the corrective order and pay the penalty surcharge under the Korea Fair Trade Commission (FTC)'s disposition. BR Korea said, "We plan to decide whether to appeal after reviewing the written judgment."
◇BBQ restricts flyer purchasing channels
A similar controversy arose at the BBQ chicken franchise brand. In Jul. 2024, the Supreme Court found in favor of the Korea Fair Trade Commission (FTC) in a suit filed by BBQ's operator Genesis BBQ Group (hereinafter BBQ) to cancel corrective orders, and sent the case back to the Seoul High Court.
When it signed franchise contracts with owners in 2019, BBQ required that promotional flyers for the brand be produced only through vendors designated by headquarters. It also required franchise business operators to produce a set number of flyers each week at their own expense, and stipulated that violating this could lead to termination of the franchise contract. The court found these actions unfair.
◇Purchase coercion recognized, but Koo Koo owners failed to prove damages
Even if it is recognized that headquarters forced franchisees to make purchases, liability for damages does not arise immediately. Franchisees must prove that they actually suffered damages, that there is a causal link with the purchase coercion, and the amount of damages.
In Sep. 2026, the Seoul Central District Court did not accept the claims of Koo Koo franchisees in their damages suit against headquarters. According to the court, Koo Koo required owners to purchase ingredients, wet wipes and napkins, and other items from vendors designated by headquarters. It also obtained a pledge stating that failure to comply could lead to disadvantages in matters such as renewal.
The court said those items did not need to be supplied solely through vendors designated by headquarters. However, it did not recognize headquarters' liability for damages. It said the evidence submitted by owners, such as price comparison tables for goods, was insufficient to find that items were supplied at prices higher than market prices.
Attorney Jeon Min-jae of Trinity Law LLC said, "The reason related lawsuits did not actively continue after the Koo Koo case is that it is not easy to prove damages," adding, "As the Korea Fair Trade Commission (FTC)'s recent assessments of purchase coercion are becoming stricter, similar reports may increase, and owners may attempt class actions."
◇For items to qualify as mandatory, 'whether they are directly related to taste and quality' must be examined
With this Dunkin ruling, owners can actively raise issues with items designated as mandatory. Beyond disputes over so-called "differential franchise fees," in which headquarters attaches distribution margins when supplying raw and subsidiary materials, owners can now also request improvements on why certain goods must be purchased only through headquarters.
However, as case law shows, to seek damages on this basis, owners must specifically prove harm, such as price differences between designated-vendor products and those on the open market. In future disputes over mandatory items, the key issues are likely to be the illegality of purchase coercion and how to calculate the amount of damages.
Attorney Lee Him-chan of LKB & Partners said, "The outcome of this case could change depending on the appellate ruling," while adding, "From the franchisor's perspective, it is necessary to view the scope of mandatory items narrowly and reexamine the necessity of each item and the contract language."