No 'Celebrity Ads' Without Franchisee Consent... 'Franchise Act Enforcement Decree Amendment' Proposed

A restaurant in downtown Seoul on the 2nd./Photo by Hyunmin Kim kimhyun81@

[Asia Economy Sejong=Reporter Lee Junhyung] The amendment to the Enforcement Decree of the Franchise Business Act, which requires franchisors to obtain prior consent from a certain percentage of franchisees when conducting advertising and promotional events, has been announced for legislative notice.

The Fair Trade Commission announced that the "Amendment to the Enforcement Decree of the Franchise Business Act" will be open for legislative notice from the 27th until March 8 of this year. This amendment includes necessary provisions for the implementation of the revised Franchise Business Act scheduled for July 5. According to the revised Franchise Business Act, franchisors must obtain consent from franchisees at a rate specified by the Enforcement Decree before conducting advertising and promotional events that impose costs on franchisees. The amendment to the Enforcement Decree stipulates that the percentage of franchisees from whom consent must be obtained is at least 50% for advertising and at least 70% for promotional events. The methods by which franchisors can seek consent from franchisees are limited to four: written form, information and communication networks, point of sale (POS) systems, and other bilateral agreements.

The amendment also increases the content that must be included in franchise agreements. The revised Franchise Business Act stipulates that franchisors may conduct advertising and promotional events only if they have concluded prior agreements in accordance with the Enforcement Decree. Accordingly, the amendment requires that agreements include ▲ the name and timing of each advertising or promotional event ▲ cost-sharing ratios ▲ upper limits on franchisee cost burdens. The form of the agreement must be a separate agreement, not part of the franchise contract.

Specific criteria for imposing fines have also been established. According to the revised Franchise Business Act, franchisors who fail to notify the details of advertising and promotional event expenses or refuse franchisees’ requests to review such details may be fined up to 10 million KRW. The amendment to the Enforcement Decree sets the fine criteria for such violations as 5 million KRW for the first violation, 7 million KRW for the second, and 10 million KRW for the third.

The Fair Trade Commission stated that once the amendment to the Enforcement Decree is finalized and implemented, the rights and interests of franchisees can be enhanced. This is because franchisees will be able to sufficiently recognize the extent of their cost burden before deciding whether to participate in advertising and promotional events conducted by franchisors. The Fair Trade Commission plans to complete the amendment process through collecting opinions from stakeholders such as franchisors and franchisees during the legislative notice period, followed by review by the Ministry of Government Legislation and the Cabinet meeting.

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