SOUTH KOREA Law and Practice Contributed by: Hongki Kim, Hwijin (HJ) Choi, Kee Won Shin and Jennifer Yein Kwon, Bae, Kim & Lee LLC
Bae, Kim & Lee LLC Centropolis B, 26 Ujeongguk-ro Jongno-gu Seoul 03161 Korea Tel: +82 234 040 000 Fax: +82 234 040 001 Email: bkl@bkl.co.kr Web: www.bkl.co.kr/law?lang=en
1. An Introduction to Franchising 1.1 Franchise Market Overview The franchise industry in South Korea is a major driv - er of the national economy, valued at approximately USD83 billion and employing over 1 million people. The sector includes more than 8,000 franchisors, 12,000 franchise brands and 365,000 franchisees nationwide. The franchise market is heavily concentrated in con - venience stores and food and beverages, though retail and service-oriented franchising also hold substan - tial market shares. Growth has been steady in recent years, with record numbers of new franchise regis - trations and continued expansion despite economic headwinds. Convenience Store Franchises South Korea has one of the world’s most saturated convenience store markets, with most major players operating under franchise models that allow participa - tion by a wide range of franchisees. Examples of such franchises include CU, GS25, 7-Eleven and emart24. Food and Beverage Franchises Franchising is the dominant model for quick-service restaurants, coffee chains and casual dining in South Korea. Examples of such franchises include the fol - lowing. • South Korean franchise brands: (a) coffee – Mega Coffee, A Twosome Place and Ediya; (b) burgers and sandwiches – Lotteria, Mom’s
Touch and Eggdrop; (c) chicken – BBQ Chicken, BHC and Kyochon; and (d) bakery – Paris Baguette and Tous les Jours. • International franchise brands: (a) coffee – Coffee Bean and Illy Caffé; and (b) burgers and sandwiches – McDonald’s, Burger King, KFC and Subway. 1.2 Franchise Regulation Obligation to Register and Provide Disclosure Documents Before entering into a franchise agreement, a fran - chisor must register its disclosure document with the competent administrative authority (Article 6-2 of the Fair Transactions in Franchise Business Act – the “Franchise Act”) and deliver the registered disclosure document to the prospective franchisee (Article 7 of the Franchise Act). Prohibition of Unfair Trade Practices Under Article 12 (1) of the Franchise Act, a franchisor shall not engage in, or cause another business entity to engage in, any of the following acts likely to impede fair franchise transactions: • unreasonable suspension or refusal to trade – unreasonably suspending or refusing to supply goods, services or business assistance to a fran - chisee, or imposing significant restrictions on such supply; • imposing unfair restrictions – imposing unfair restraints on the prices of goods or services han - dled by a franchisee, or on the franchisee’s cus - tomers, business territory or business activities;
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