On September 23, 2025, the new Chairperson of the Korea Fair Trade Commission (“KFTC”) held a meeting with franchisees and announced the KFTC’s “Comprehensive Plan for Enhancing Franchisee Rights” (the “Plan”). The Plan aims to strengthen the rights and protect the interests of franchisees throughout the franchising process, from the initial launch, operations and business closure. The KFTC is first expected to complete the necessary legislative amendments, including to the Fair Franchise Transactions Act (“FFTA”), its Enforcement Decree and Notice, in order to implement the measures provided for under the Plan.
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(1)
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Initial Launch Stage - systemic improvements to ensure sound launch of franchise business
These measures focus on providing prospective franchisees timely access to accurate information about the intended franchise business, and thereby prevent the indiscriminate expansion of unsound brands operated by franchisors with insufficient business expertise.
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Measure
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Details
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New disclosure requirement for information statements
(Requires amendment of the FFTA and its Enforcement Decree)
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Franchisors required promptly disclose changes to existing information statements, on an on-going basis, with post disclosure review by the KFTC (new franchise registrations would remain subject to prior review of the initial information statements by the KFTC)
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New process for KFTC confirmation of information disclosed by franchisors to prevent false disclosures
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Enhanced penalties for false disclosures
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New requirements regarding information statement content and disclosure process
(Requires amendment of the FFTA Enforcement Decree and Notification)
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Information statement contents to be organized to track the order of the business life cycle (launch-operation-closure)
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Mandatory disclosure of key information material to the decision to launch the business (e.g., delivery app fees, penalties for early termination etc.)
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Requirement to provide of a summary to help prospective franchisees readily identify key terms and conditions
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Expand franchisors’ direct sales
experience obligation
(Requires amendment of the FFTA and Enforcement Decree)
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(2)
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Operational Stage – ensure conduct of business “on equal terms” by enhancing franchisees’ bargaining power
These measures are intended to enable franchisees, who have less relative bargaining power vis-à-vis franchisors, to be able to negotiate on equal terms.
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Measure
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Details
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Registration of franchisee
associations
(Requires amendment of the FFTA and Enforcement Decree)
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Franchisors required to comply
with franchisee associations’
request for consultation
(Requires amendment of the FFTA and Enforcement Decree)
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Establish legal grounds for imposing sanctions (corrective orders) on franchisors that refuse a franchisee association’s request for consultation without just cause, to enhance the franchisees’ collective bargaining rights
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Franchisors may refuse such request if there is just cause, and the franchisees’ rights will be subject to certain other limitations (e.g., frequency of requests)
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Strengthen enforcement of
unfair trade practices
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(3)
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Business Closure Stage – minimize franchisee burden by ensuring decision making independence
These measures are intended to assist franchisees who need to close their business, and mitigate the burden of excessive penalties.
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Measure
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Details
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Specify franchisees’ right to
terminate franchise agreements
(Requires amendment of the FFTA and Enforcement Decree)
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FFTA to specifically reference franchisees’ right to terminate franchise agreements, to allow early termination by franchisees without being subject to excessive penalties
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However, as such early termination may be against the general principle of compliance with contracts, restrictions will apply, including as to the grounds for termination
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Require prior notice of scheduled renewals and grant franchisees
access to information statements
(Requires amendment to the FFTA and Enforcement Decree)
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Require franchisors to provide franchisees notice of scheduled renewals of franchise agreements in order to protect franchisees from automatic contract renewals
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Mandatory access to information statements (including non-public items) to be granted to Franchisees whose franchise contracts are scheduled for renewal
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Disclosure of penalties for early
termination
(Requires amendment to the FFTA Enforcement Decree and Notification)
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2.
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Implications
The Plan reflects the KFTC’s strong commitment to transparency and fairness throughout the franchising process, and is expected to have a material impact on existing franchise business models and operations. Therefore, franchisors would be advised to prepare for the changes to be introduced under the Plan and manage potential legal exposure through preemptive measures, such as reviewing existing information statements management practices, developing strategies to address potential collective bargaining requests or contract terminations, and identifying other areas of potential exposure. As the KFTC plans to finalize the details of the Plan, including by conducting third-party studies and gathering industry opinions, we will continue to closely monitor future developments, including during the legislative amendment process.
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[Korean Version]
