Seoul City to Foster 'Seoul-style Social Franchise,' a Win-Win Model for Franchise Headquarters and Store Owners

Promotion of 'Seoul-type Social Franchise' Project to Improve Unfair Franchise Practices
Supporting Establishment of Franchises Realizing Social Value: Franchise→Cooperative, Cooperative→Franchise

[Asia Economy Reporter Lim Cheol-young] The Seoul Metropolitan Government is taking steps to resolve unfair practices between franchisors and franchisees, often referred to as the "Gap (甲) and Eul (乙)" relationship, and to strengthen the self-sustainability of small-scale franchise stores struggling against large franchises.

On the 1st, Seoul announced that it will select around 12 "Seoul-type Social Franchises" to lead the establishment of a fair trade culture between franchisors and franchisees. The goal of social franchises is to provide comprehensive support?from business model development to marketing and management capacity enhancement?so that franchisors and franchisees can fairly share business performance and grow together in mutual prosperity.

As of the end of 2019, there were approximately 47,000 franchise stores registered in Seoul, employing about 200,000 people. Despite COVID-19, the number has been on the rise. However, as the number of franchise stores increases quantitatively, disputes between franchisors and franchisees have also been continuously growing, making it urgent to establish business models with social value such as the "Seoul-type Social Franchise."

The "Seoul-type Social Franchise" consists of four major business types: establishment and operation of cooperatives by franchises and social enterprises; entry of cooperatives and social enterprises into franchising; franchises that realize social value; and co-growth of franchisors and franchisees.

Once selected as a "Social Franchise," professional consultants will provide close consulting for 4 to 5 months to systematically support the growth of the company, tailored to cooperatives and franchises. Consulting covers basic management strategies such as market analysis and business strategy formulation, business model development necessary for establishing franchises and cooperatives, marketing and logistics support including product analysis and distribution, and management capacity enhancement such as finance and organizational management.

Applications for participation in the "Seoul-type Social Franchise" are open to franchisors (or franchisee councils) or cooperatives with their main office in Seoul. However, industries deemed inappropriate such as entertainment and leisure businesses, alcohol brokerage and wholesale, as well as companies with financial institution defaults or overdue national and local taxes, are not eligible for support.

The city is also recruiting consulting organizations to perform social franchise consulting together with participating companies. Organizations with a pool of experts such as franchise transaction specialists, management consultants, accountants, tax accountants, lawyers, and distribution managers who have knowledge, experience, and know-how related to social franchise development and support can apply. The recruitment period for both participating companies and consulting organizations is until the 7th. Details on eligibility, fields, and required documents can be found on the Seoul city website (www.seoul.go.kr), and applications should be submitted via email after checking the announcement.

In addition to consulting, subsidies of up to 12 million KRW per company are available for brand development, IT environment construction and improvement, marketing, and education. Among cooperative-type franchises, companies with a clear awareness of operational issues, achievement goals, and detailed implementation plans that can ensure future self-sustainability will be selected.

Park Ju-seon, Director of Fair Economy at Seoul City, said, "Franchise businesses have low risk and can be started with small capital, so many citizens choose them as their first startup field. However, many small business owners suffer due to the 'Gapjil' (abuse of power) by franchisors. We will provide systematic support so that the Seoul-type Social Franchise, which can achieve both social value and profitability, can establish itself as a new model for a fair franchise market."

This content was produced with the assistance of AI translation services.