Reason for proposal

The current Act provides diverse protective measures against various unfair acts to enable franchisees to deal with franchisors on an equal footing.

Some franchise regional headquarters serve the franchisees on behalf of the franchisors within a certain region under a contract with the franchisor. However, there are cases in which franchisees have suffered damages due to the franchisor's abuse of his or her superior position, including unfair charges claimed and unilateral termination notices. The current Act mainly provides protection against unfair acts against franchisees, leaving the franchise regional headquarters in a blind spot of legal protection.

In order to strengthen the rights of the franchise regional headquarters, the proposed amendment is designed to have certain provisions that apply to the franchisees apply to the regional headquarters as well, with necessary modifications, including those prohibiting unfair acts and retaliatory measures by franchisors. The amendment prohibits unfair acts and retaliatory measures against the regional headquarters by the franchisor, guarantees the right to apply for contract renewal, and provides for prior notification of contract termination and the imposition of sanctions.

In addition, there are no detailed provisions for the organization of franchisee organizations, which makes it difficult for franchisees to learn about the existence of such organizations. The Act merely provides that franchisors are required to respond in good faith when the franchisee organization requests a consultation, which makes it difficult to negotiate the terms of the transactions.

In response, the proposed amendment introduces a registration system designed to secure the representation and negotiating power of the franchisee organizations. It also provides a hearing procedure for canceling or revoking the registration of franchisee organizations, and introduces sanctions against a franchisor in the event that the latter fails to respond to a request from a registered franchisee organization for consultation in accordance with the standards set by the Presidential Decree.

Main contents

a. It aims to prohibit unfair acts and retaliatory measures by the franchisor against the regional headquarters, guarantee the right to apply for contract renewal, ensure advance notification of contract termination, and impose sanctions against franchisors (Newly established Article 2 of the draft).

b. It provides that the number and subject matters of consultations with the franchisors are to be determined by the Presidential Decree, and also introduces a registration system for the franchisee organizations together with the matters necessary for their registration (Newly established Article 14-2 and Article 14-3 of the draft).

c. It introduces the causes of or reasons for revoking the registration of a franchisee organization and the hearing procedure for revocation (Article 14-3 (4) and Article 14-3 (5) of the draft).

d. It imposes sanctions against a franchisor in the event that the latter fails to respond to a request for consultation from a registered franchisee organization in accordance with the standards prescribed by the Presidential Decree (Article 33 of the draft).

e. It provides that the registration and revised registration of the franchisee organizations are to be entrusted to the Korea Fair Trade Mediation Service, etc. (Article 39 (2) of the draft).