The Korea Fair Trade Commission (KFTC) is considering lowering the minimum registration requirements for franchisee associations, responding to concerns that small franchise operators may find it difficult to register.
KFTC Chairman Joo Byung-ki announced on September 11 that he held meetings with franchisees and franchisors regarding amendments to the Franchise Business Act. The franchisee meeting included representatives from the National Franchisee Council and franchisee groups from CU, Gupne Chicken, Sulbing, and Yeondon Volcarts. The franchisor meeting included members from the Korea Franchise Industry Association and the Korea Convenience Store Industry Association.
Previously, the KFTC had announced a legislative and administrative notice regarding the amendment to the enforcement decree of the Franchise Business Act, which introduces a registration system for franchisee associations and mandates good faith negotiations by franchisors with registered associations. The public comment period is open until September 14.
The legislative notice allows associations with participation from at least 10% of franchisees to apply for registration, establishing a minimum threshold. While this aims to reduce the negotiation burden on small franchisors, critics argue that it could inadvertently require a higher participation rate from franchisees in smaller franchisors due to their limited number of outlets.
As of the end of last year, there were 9,960 franchisors, 13,725 brands, and 379,739 franchise outlets in South Korea. Applying a uniform percentage and minimum threshold in a market with significant disparities in brand and outlet sizes could lead to varying impacts on small and large brands.
Franchisee representatives argue that the minimum registration requirements could limit their ability to organize and negotiate effectively. They also expressed concerns that franchisors might broadly interpret reasons to refuse or limit negotiation requests.
On the other hand, franchisors worry that lowering the registration threshold to 10% could lead to the proliferation of multiple associations. They argue that applying the results of negotiations with less representative associations to all franchisees could create confusion in the field.
Chairman Joo stated that he is considering lowering the threshold to address concerns that registration requirements may be burdensome for franchisees associated with small franchisors. He also indicated that he would review the potential side effects raised by franchisors, such as the proliferation of associations, with an open mind.
The KFTC plans to complete the amendment of the enforcement decree before the scheduled implementation date of the revised Franchise Business Act on December 31, reflecting the results of the public comment period.
* This article has been translated by AI.
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