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Toward mutual prosperity

July 05,2017
Predatory and unfair practices by franchisors have long been commonplace. They unilaterally fix or nullify franchise agreements, transfer the cost of advertising and renovation to their franchisees, and force umbrella outlets to buy supplies beyond necessity. They retaliate against vendors by interfering with their new businesses if they end their contract early. They earn money by forcing vendors to use supplies from businesses owned by their own family members.

Vendors have suffered losses after major fried chicken franchise Hosigi chairman Choi Ho-sig was alleged to have sexually molested his female secretary. The risks and irregularities, however, have not been fixed because of little motivation on the part of authorities and the danger of wrecking the incomes of mom-and-pop stores.

Prosecutors’ probe on Jung Woo-hyun, chairman of MP Group, which runs pizza chain Mr. Pizza, could be the first criminal case against a franchise business. The liberal administration under President Moon Jae-in has vowed to fix irregularities by proposing over 20 bills to ensure better protection of small vendors and franchisees.

The Fair Trade Commission plans to make a rule to prevent retaliation against franchises. Headquarters would have to pay triple the losses in damages if any irregularities harm franchisees and their businesses.

There are over 210,000 franchised businesses across the country and they are the primary income base for many self-employed people. The industry must also develop resilience. No industry can progress and last through regulations and outside intervention. Businesses cannot be sustainable if franchisors merely chase selfish interests. It must come up with a partnership model to grow together with franchisees.