BBQ and BHC Terminated Franchise Contracts for 'Group Activities'... Fair Trade Commission Issues Corrective Orders and 2 Billion KRW in Fines

'Demanding a written pledge not to participate in council activities and
forcing franchisees to bear the full cost of purchasing 'promotional leaflets'

[Sejong=Asia Economy Reporter Joo Sang-don] It has been revealed that BBQ and BHC, leading franchises in the chicken industry, caused disadvantages to franchisees by terminating franchise contracts on the grounds that they led franchisee business associations. Accordingly, the Fair Trade Commission decided to impose corrective orders along with fines.

The Fair Trade Commission announced on the 20th that it has decided to impose corrective orders and a total fine of 2.032 billion KRW on Genesis BBQ and BHC for violating the Franchise Business Act.

According to the Fair Trade Commission, BBQ refused contract renewals or effectively forced six franchise stores, including Yongin Jukjeon Saeteo Branch (co-chair), which led the establishment and activities of the 'National BBQ Franchisee Business Association,' to write contract termination deferment requests or written pledges stating they would not participate in council activities.

Earlier, in November 2018, Yongin Jukjeon Saeteo Branch and others formed the BBQ council and engaged in group activities such as urging the implementation of the 2017 announced cooperation plan by BBQ (minimizing mandatory items, disclosing distribution margins, etc.), conducting media interviews, and delivering requests for consultation. In response, BBQ notified four franchise stores, including Yongin Jukjeon Saeteo Branch, that contract renewals were refused due to 'changes in corporate management policies and differences in stance on franchise contracts' or 'non-acceptance of generally applied franchise contract conditions or business policies.' Additionally, four franchise stores including Daegu Sangyeok Branch were required to write contract termination deferment requests or written pledges stating that if they caused damage due to council activities or 'defamed the headquarters or incited other franchisees,' the contract could be terminated at any time and no objections would be raised.

The Fair Trade Commission judged that these actions violated the Franchise Business Act, which prohibits disadvantaging franchisees due to forming, joining, or participating in associations.

According to the investigation by the Fair Trade Commission, BBQ also forced franchisees to produce and distribute an excessive amount of promotional leaflets beyond what is necessary for franchise business management, mandating purchase only from BBQ or designated companies. Franchisees bear the full cost of these promotional leaflets. Furthermore, from November 20, 2019, to April 27 of this year, BBQ set contract termination reasons without following termination notification procedures when concluding franchise contracts, including ▲failure to complete basic training ▲non-use of mandatory items ▲defamation of the headquarters by spreading false information ▲business obstruction ▲leakage of trade secrets. This arbitrarily expanded the grounds for immediate termination or added reasons not permitted by enforcement ordinances, imposing unfavorable conditions on franchisees.

BHC also immediately terminated contracts without just cause for seven franchise stores, including Ulsan Okdong Branch, which led the establishment and activities of the 'National BHC Franchisee Council.' Additionally, BHC forced all franchise stores to handle online coupons (such as KakaoTalk Gift) from October 1, 2018, without basis in franchise contracts or disclosure documents, and made them bear the entire commission fee (8% of the approved sales amount) agreed with the coupon agency. Subsequently, to enforce online coupon handling, BHC repeatedly sent certified letters warning franchise stores that refused coupon orders about mandatory headquarters training, suspension of goods supply, and contract termination notices.

Accordingly, the Fair Trade Commission imposed corrective orders including prohibition of acts, notifications, and education, and fines of 1.532 billion KRW and 500 million KRW on BBQ and BHC, respectively.

A Fair Trade Commission official stated, "This action is a strict sanction against leading chicken industry companies abusing contract termination rights against franchisees who led council activities. We will continue to thoroughly monitor to prevent repeated unfair trade practices in the franchise sector and take strict measures when violations are detected to strongly protect small business franchisees."

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