Franchise disclosure documents will now include information on average penalties for contract termination and long-term survival rates. Additionally, the maximum fines imposed on franchisors that repeatedly violate the law will be increased.
The Fair Trade Commission announced on July 28 that a revised enforcement decree for the Franchise Business Act has passed the Cabinet meeting. This amendment will be implemented starting January 1, 2027, alongside the announcement of the standard format for franchise transaction disclosure documents next month.
This revision is a follow-up measure to the government's national agenda and comprehensive plan to strengthen the rights of franchisees, aimed at addressing shortcomings in the operation of disclosure documents and enhancing market transparency.
New items will be added to the disclosure document that directly affect the decision-making of prospective franchisees. These include the long-term survival rates of franchisees, average penalties for contract termination, and information on franchisors owned by private equity funds. Notably, the frequency of disclosures regarding the number of franchise and company-owned stores, a key indicator for assessing a brand's growth potential, will be reduced from once a year to quarterly, providing more up-to-date information.
The format and structure of the disclosure document will also be revised. The table of contents will be reorganized to follow the franchise life cycle, including opening, operation, and closure, and a summary will be created to compile key information such as the number of franchises by region and average annual sales.
Moreover, franchisors will be required to submit documentation to verify compliance with the '1+1 obligation,' which mandates that they operate at least one company-owned store for over a year before registering.
The penalties for unfair practices will also be strengthened. The maximum fines for franchisors that repeatedly violate the law will be increased, and the adjustment limit for fines imposed by the Fair Trade Commission will rise from 50% to a maximum of 100%.
Measures to enhance administrative efficiency will be implemented concurrently. The Fair Trade Commission will establish provisions allowing for online processing of registration cancellations in the event of business closures and will enable the disclosure document registration agency to notify via email.
This amendment will be implemented sequentially after receiving presidential approval. The Fair Trade Commission stated, "We plan to carry out follow-up measures, including system reforms, to enhance the transparency and reliability of franchise transactions and assist prospective franchisees in making informed decisions."
The Fair Trade Commission announced on July 28 that a revised enforcement decree for the Franchise Business Act has passed the Cabinet meeting. This amendment will be implemented starting January 1, 2027, alongside the announcement of the standard format for franchise transaction disclosure documents next month.
This revision is a follow-up measure to the government's national agenda and comprehensive plan to strengthen the rights of franchisees, aimed at addressing shortcomings in the operation of disclosure documents and enhancing market transparency.
New items will be added to the disclosure document that directly affect the decision-making of prospective franchisees. These include the long-term survival rates of franchisees, average penalties for contract termination, and information on franchisors owned by private equity funds. Notably, the frequency of disclosures regarding the number of franchise and company-owned stores, a key indicator for assessing a brand's growth potential, will be reduced from once a year to quarterly, providing more up-to-date information.
The format and structure of the disclosure document will also be revised. The table of contents will be reorganized to follow the franchise life cycle, including opening, operation, and closure, and a summary will be created to compile key information such as the number of franchises by region and average annual sales.
Moreover, franchisors will be required to submit documentation to verify compliance with the '1+1 obligation,' which mandates that they operate at least one company-owned store for over a year before registering.
The penalties for unfair practices will also be strengthened. The maximum fines for franchisors that repeatedly violate the law will be increased, and the adjustment limit for fines imposed by the Fair Trade Commission will rise from 50% to a maximum of 100%.
Measures to enhance administrative efficiency will be implemented concurrently. The Fair Trade Commission will establish provisions allowing for online processing of registration cancellations in the event of business closures and will enable the disclosure document registration agency to notify via email.
This amendment will be implemented sequentially after receiving presidential approval. The Fair Trade Commission stated, "We plan to carry out follow-up measures, including system reforms, to enhance the transparency and reliability of franchise transactions and assist prospective franchisees in making informed decisions."
* This article has been translated by AI.
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