97% of Franchisees Say "Prior Consent Required for Advertising and Promotional Events"

Fair Trade Commission, 2021 Franchise Sector Survey Results

Improvement in Transaction Practices 86.6%
Unilateral Advertising Without Franchisee Consent 45.4%, Promotions 43.2%

[Asia Economy Reporter Joo Sang-don] The proportion of franchisees who responded that prior consent from franchisees should be obtained for advertising and promotional events was very high at about 97%.

On the 29th, the Fair Trade Commission announced the results of the 2021 written survey on the franchise sector conducted on 200 franchisors and 12,000 franchisees.

The proportion of franchisees who responded that transaction practices have improved was 86.6%, and the proportion of franchisees satisfied with franchise sector policies was high at 87.9%.

However, issues such as ▲ franchisors unilaterally conducting advertising and promotional events ▲ franchisors refusing requests for consultation from franchisee organizations ▲ concerns over sales decline of franchisees due to franchisors selling goods online ▲ franchisors providing inflated expected sales information to prospective franchisees continue to persist, raising the need for related system improvements and strengthened market monitoring.

The rate at which franchisors conduct advertising and promotional events unilaterally without franchisee consent reached 45.4% for advertising and 43.2% for promotional events.

In this regard, about 97% of franchisees responded that prior consent from franchisees should be obtained for advertising and promotional events.

The proportion of franchisees who are members of franchisee organizations was about 39.6%, and the rate at which franchisors rejected negotiation requests on transaction conditions from franchisee organizations citing issues such as the organizations’ representativeness was 29.7%.

The proportion of franchisors selling goods through direct online malls was 18.1%, and those selling goods through other online platforms or open markets was 20.1%.

Although such online sales by franchisors can lead to decreased sales for franchisees, the proportion of franchisors consulting with franchisees on transaction conditions in online sales was low at 33.0%.

Many franchisees responded that franchisors engage in unfair transactions such as exaggerating expected sales information (13.3%) or unfairly shifting advertising costs (13.0%).

A Fair Trade Commission official stated, "We plan to work to ensure the prompt passage of the amendment to the Franchise Business Act, which includes the introduction of a prior consent system for advertising and promotional events and a registration system to verify the representativeness of franchisee organizations, in the National Assembly. We will also strengthen market monitoring to prevent illegal acts by franchisors, such as exaggerating expected sales information at the franchise startup stage, in preparation for active franchise startups as phased daily recovery is implemented."

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