"Concerns over up to 10 competing franchisee associations"... Franchise industry pushes back against franchise law

[Financial News] The franchise industry is strongly opposing the Enforcement Decree of the Fair Transactions in Franchise Business Act, which is scheduled to take effect at the end of this year to strengthen franchisees’ bargaining power. Under the decree, franchisee associations could register and demand legally mandated consultations with franchisors if they bring together just 10% of all franchisees. The industry is calling for a comprehensive overhaul, warning of management burdens caused by the proliferation of negotiating associations.
At a press briefing held at the association’s office in Yeouido, Seoul, on the 8th, Na Myung-seok said, "We agree with the basic purpose of the system, which is to expand franchisees’ opportunities for meaningful communication and consultation. However, it could produce adverse effects, including a lack of representativeness, the proliferation of multiple associations, an unclear scope of consultations, and management burdens caused by repeated consultations." On the 3rd of last month, the Fair Trade Commission announced legislative and administrative notices concerning proposed amendments to the Enforcement Decree of the Fair Transactions in Franchise Business Act and a proposed related notification on the registration system for franchisee associations and the right to request consultations. The rules will take effect on December 31.
Na said, "The core provisions of the government’s draft discussed at the meeting in June were unilaterally changed in just over two months, altering the system’s basic direction." He explained, "In the final proposed notice, the basic registration threshold was lowered from 30% to 10% of all franchisees, and provisions were added allowing a person who ‘lawfully represents the parties’ to attend consultations."
He continued, "Although the industry had concerns about the government’s June draft, we engaged in good-faith discussions out of respect for the system’s purpose and waited for a balanced proposal. Instead, the contents of the proposed notice have worsened, and prior consultations and explanations were also insufficient."
Na pointed to what he called problematic provisions in the proposed notice and urged revisions. He first cited the registration requirements for franchisee associations. Under the proposal, an association can request legally mandated consultations if at least 10% of all franchisees join it. This means an association can register if it has at least 30 members or if the number of participating franchisees is 1,000 or more.
Na expressed concern, saying, "It is difficult to regard an association representing 10% of franchisees as representing the views of all franchisees. If up to 10 associations proliferate and make different demands, franchisors will be unable to formulate normal policies and apply them across the entire network." He added, "The basic registration threshold should be raised to 30% to 40% of all franchisees. If the 10% threshold is maintained, safeguards are needed, such as consolidating the consultation channel, making network-wide application mandatory, or requiring consent from at least 40% of franchisees."
Na also pointed out that the proposal excessively broadens the scope of consultations to include all legally required information in franchise agreements, as well as matters related to advertising and promotional events. He said the scope of and responsibilities for a person who may participate in consultations as someone who ‘lawfully represents the parties’ are unclear. KFA plans to call for a comprehensive revision of the proposed notice at a meeting with the chair of the Fair Trade Commission scheduled for the 11th.
[email protected] Kim Seo-yeon Reporter