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Korea moves to strengthen rights of franchisees

South Korea's antitrust regulator announced a set of measures meant to strengthen rights of franchisees Tuesday, a sign that underscores the government's commitment to ending unfair business practices across the board.

The measures call for, among other things, food franchisers to release information on profit margins of essential goods that franchisees need to buy from their corporate parents, the Fair Trade Commission said.

Commission officials will team up with their counterparts from the Seoul Metropolitan Government and Gyeonggi Province that surrounds Seoul to conduct on-site inspections of 2,000 franchisees of 30 major franchisers, it said.

(Yonhap)
(Yonhap)

The FTC also stressed it would ensure franchisees can report any abusive corporate practices to the commission while banning franchise headquarters from taking any retaliatory steps, including the termination of franchise deals.

The commission said a bill pending in the parliament would mandate corporate parents to compensate for any financial damages franchisees suffer in case of any problems blamed on corporate owners or executives.

"We will do our best to make sure that franchisees will not be disappointed," FTC Chairman Kim Sang-jo said in a news conference.

He also said the government will push to revise relevant laws to strengthen the rights of franchisees while encouraging franchise headquarters to end abusive business practices.

The latest move came amid a public uproar against Chung Woo-hyun, the founder of Mr. Pizza, a major South Korean pizza franchise.

Earlier this month, the Seoul Central District Court issued an arrest warrant for Chung over suspicions that he ripped off contractors and embezzled company funds.

He is accused of forcing franchisees of the Mr. Pizza brand to buy the cheese from a food distributor run by a relative above market prices. Chung is also suspected of having the company pay his family members' salaries even though they did not show up for work.

Mr. Pizza is an indigenous brand launched by Chung in 1990. It has grown into one of the top three pizza chains in the country, currently running over 300 stores nationwide, and some 140 branches in China. (Yonhap)

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