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FTC fines Masedarin W551 million

Dec 18,2017
The Fair Trade Commission on Sunday said it has slapped a 551 million won ($506,000) fine on Masedarin, the franchise company known for its marinated chicken brand Gamaro Gangjung, for forcing franchisees to buy items such as tissues and timers at a price higher than the market rate.

Masedarin has been expanding at an alarming rate since it was first founded in 2012. As of last year it had 165 franchisees across the country with revenue of roughly 17.5 billion won. In December 2012 there were only 91 stores with revenue amounting to 2.2 billion won.

According to the antitrust agency, the franchise company forced its franchisees to purchase a total of 50 items between December 2012 and September this year. The FTC concluded that the items that were forced upon the franchisees had little impact on the quality and the taste of the chicken sold.

When signing a contract with Masedarin, franchisees would be forced to purchase nine items regularly, including tissues and sanitary masks as well as sauce cups and plastic bottles.

Under the contract, if a franchisee did not purchase these items, the headquarters would not only have the rights to stop the supply of its products, but even cancel the contract.

When initially opening the store, a franchisee would have to purchase 41 kitchen utensils including a waste bin, thermometer and even cutting boards. If they did not agree to buy the items, the company would prevent the store from opening under their brand.

The FTC found that the items franchisees were forced to buy cost 20 to 30 percent more than the same products cost online.

In the case of the timer, Masedarin charged 21,450 won, while the same product is available online for 16,900 won, 21.2 percent cheaper. One plastic container that the company forced franchisees to buy for 9,680 won was available online for 6,690 won, 30.9 percent less.

“We plan on revising the franchise law that will require all franchise headquarters to disclose the profits they make from items that are forced upon franchise stores early next year,” said an FTC official. “We hope to convert the profit structure of the franchise business to become more transparent.”

BY LEE HO-JEONG [lee.hojeong@joongang.co.kr]