Gyeonggi-do Takes 'Ex Officio Action' Against Franchisees Illegally Profiting from False Registrations

[Asia Economy (Suwon) = Reporter Lee Young-gyu] Gyeonggi Province imposed a fine of 2 million won and canceled the registration of the disclosure document on Franchise Headquarters A, which concealed a margin exceeding 10 million won while supplying unmanned vending machines (kiosks) to franchise stores, thereby gaining an unfair profit of over 800 million won.

This is the first time that Gyeonggi Province has taken a discretionary action after confirming false information registration by a franchise headquarters.

According to the province on the 29th, Franchise Headquarters A supplied kiosks to 70 franchise stores nationwide over the past four years, leaving a margin of 12 million won per unit (supply price - purchase price), while conveying to franchisees through the disclosure document that there was no profit (difference in franchise fees) at the headquarters level.

The disclosure document is a document that contains necessary business information such as startup costs and difference in franchise fees, which prospective franchisees must check before signing a contract with the franchise headquarters, and must be registered with the metropolitan local government to recruit prospective franchisees.

If the purchase price and supply price of goods delivered to franchise stores by the franchise headquarters differ, this must be specified in the disclosure document.

If the registration of the disclosure document is canceled, the brand cannot recruit new franchise stores until at least 60 days after re-registration.

Separately from Gyeonggi Province’s discretionary action, the Fair Trade Commission is investigating Franchise Headquarters A’s actions as a violation of the Franchise Business Act (deceptive information provision).

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