"Delivery Only from Franchise Business Bases"... Fair Trade Commission Revises Standard Franchise Agreement

[Asia Economy Reporter Eunju Lee] In the future, franchisees will find it difficult to deliver food beyond the ‘business area’ they have set. Additionally, if the franchisor wants to charge franchisees for advertising costs during the process, they must obtain consent from more than half of the franchisees.

On the 6th, the Fair Trade Commission announced that it has revised the standard franchise contracts for 13 industries to establish a fair franchise business transaction order and strengthen the rights and interests of franchisees. The 13 industries include sectors such as chicken, pizza, coffee, and other dining businesses, where conflicts related to delivery apps are frequent during business operations.

As delivery operations have recently become more active, disputes related to delivery app operations among franchisees within the same brand franchisor have frequently occurred. Disputes have increased as more franchisees expose their stores on delivery apps and operate in areas that belong to other franchisees’ business regions. In response, the Fair Trade Commission added a clause to the standard franchise contract stating that when franchisees operate through delivery apps, they must set their franchise address as the business base to prevent harm to other franchisees. Furthermore, the contract includes provisions requiring the franchisor to make reasonable efforts to resolve disputes between franchisees.

Additionally, the procedures that franchisors must follow when conducting advertising or promotional events that require franchisees to share costs, even partially, have been specifically regulated. It is stipulated that prior consent must be obtained from at least 50% for advertising and 70% for promotional events, and even with franchisee consent, specific information must be notified in advance. The name and duration of the advertising or promotional event, the costs involved, the cost-sharing ratio, and limits must be announced beforehand. The revised Franchise Business Act supplements the lack of specific regulations on the content requiring consent, even though it recognizes the necessity of obtaining consent for cost burdens.

Moreover, to strengthen franchisee protection, the contract specifies that if the franchisor causes damage to franchisees by providing false or exaggerated information, refusing transactions, or retaliatory actions, they must compensate within a range not exceeding three times the damage. The Fair Trade Commission will post the revised standard franchise contracts on its website and distribute them to franchisors and franchisee-related organizations to encourage their use. The Fair Trade Commission stated, “This revision of the standard franchise contract will help franchisors adjust interests arising from operations through delivery apps,” and added, “We expect it will also improve the practice of franchisors unilaterally conducting advertising or promotional events.”

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