Under a revised franchise business law mandating the inclusion of essential items in contracts, two out of three retail and service franchises have been found to omit certain items or fail to comply with the requirements.
The Fair Trade Commission announced on August 12 the results of its compliance inspection conducted in June and July on 100 major franchise headquarters in the retail and service sectors.
According to the revised franchise business law that took effect in January 2022, franchise headquarters are required to specify the types of essential items that franchisees must purchase from the headquarters or designated suppliers, as well as the pricing methods for these items, in their contracts. Following an inspection of 75 companies in the food service sector last year, the Commission this year reviewed the contract status and copies from 100 franchise headquarters in the retail and service sectors.
The inspection revealed that 23 of the 100 companies surveyed did not have any essential items, meaning that the actual requirement applied to 77 companies.
Among these 77 companies, 67 made efforts to include essential items in their contracts, while the remaining 10 either mistakenly believed they had no essential items or were unaware of the legal changes, resulting in no inclusion in their contracts.
Of the 67 companies that included essential items in their contracts, only 55 fully complied with all requirements. Twelve companies omitted some types or pricing methods.
Notably, only 26 of the 77 companies (33%) fully applied the requirements to all franchise agreements. The Fair Trade Commission has decided to grant a one-month period for voluntary corrections to the 51 companies (66%) that failed to include some or all required items in their contracts.
In terms of the types of essential items specified, 65 companies (97%) provided specific items, while 2 companies (3%) listed them in general terms. Regarding the pricing methods, 55 companies were found to have specified criteria or price increases in accordance with the Fair Trade Commission's guidelines.
A Fair Trade Commission official stated, "We will thoroughly monitor contract changes during the voluntary correction period and will continue to encourage the full implementation of the regulatory improvements in the franchise sector."
The Fair Trade Commission announced on August 12 the results of its compliance inspection conducted in June and July on 100 major franchise headquarters in the retail and service sectors.
According to the revised franchise business law that took effect in January 2022, franchise headquarters are required to specify the types of essential items that franchisees must purchase from the headquarters or designated suppliers, as well as the pricing methods for these items, in their contracts. Following an inspection of 75 companies in the food service sector last year, the Commission this year reviewed the contract status and copies from 100 franchise headquarters in the retail and service sectors.
The inspection revealed that 23 of the 100 companies surveyed did not have any essential items, meaning that the actual requirement applied to 77 companies.
Among these 77 companies, 67 made efforts to include essential items in their contracts, while the remaining 10 either mistakenly believed they had no essential items or were unaware of the legal changes, resulting in no inclusion in their contracts.
Of the 67 companies that included essential items in their contracts, only 55 fully complied with all requirements. Twelve companies omitted some types or pricing methods.
Notably, only 26 of the 77 companies (33%) fully applied the requirements to all franchise agreements. The Fair Trade Commission has decided to grant a one-month period for voluntary corrections to the 51 companies (66%) that failed to include some or all required items in their contracts.
In terms of the types of essential items specified, 65 companies (97%) provided specific items, while 2 companies (3%) listed them in general terms. Regarding the pricing methods, 55 companies were found to have specified criteria or price increases in accordance with the Fair Trade Commission's guidelines.
A Fair Trade Commission official stated, "We will thoroughly monitor contract changes during the voluntary correction period and will continue to encourage the full implementation of the regulatory improvements in the franchise sector."
* This article has been translated by AI.
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