Bhc fined $270,000 for abusing franchisees

Bhc, one of Korea's biggest fried chicken franchises, has been fined 350 million won ($270,000) by the Fair Trade Commission (FTC) for canceling a business contract with one of its franchisees without sufficient reason, according to the antitrust agency, Wednesday.

This is the second time the FTC fined Bhc over disputes with the franchisee in the southeastern port city of Ulsan. In 2021, Bhc was fined 500 million won in 2019 after the franchisee sued Bhc shortly after being notified of a business contract annulment. The reason given for the annulment was that the franchisee had damaged Bhc's image by spreading false information to other franchisees.

The franchisee said he discussed the questionable quality of poultry and the prices of deep-frying oil Bhc supplied to other franchisees. The franchisee said this should not be construed as damaging the company's reputation, as the company franchisees formed a federation and share various opinions.

"The company apparently killed the contract for no just reason," said the franchisee. "I was made an example of by the company after what I had said to other franchisees."

The franchisee filed a preliminary injunction at a district court requesting the contract be upheld. He won the suit and the FTC began investigating the case. In January 2020, Bhc revived the contract and the franchisee resumed his business.

But he received a second notice of business cancellation by Bhc in October of that year after the franchise appealed court's ruling and won.

The FTC, however, said the cancellation was illegal because the appellate court's ruling did not carry terms that allow the company to cancel the contract.

"The appellate court's ruling specifically stated that the court cannot rule whether the cancellation was illegal because the operator was running the business as usual at the time the company made the appeal," said an official at the FTC. "So, the ruling in the end didn't provide the company any excuse to cancel the contract, again."

Bhc said it accepts the FTC's decisions and fines, and does not intend to continue the legal dispute.

"We acknowledge the misjudgments and ill-decisions made by our officials in the past and will strive to prevent this kind of incident from happening again," said the company. "We have already begun monitoring our chains with outside inspectors to find any illegal processes involved."

On Wednesday, fried chicken franchise also said its menu prices will be increased by up to 3,000 won, starting Friday. The price hike, which is the first one in two years, increases the average price of bhc chicken by 12.4 percent to 20,000-21,000 won, similar to those offered by other companies in the same industry.

"We kept seeing seeing our brand franchisees demanding us to raise retail prices as they were suffering from declining profits due to hikes in fixed expenses like fees for delivery firms, wages and rent," a Bhc official said. "After we tried to deal with the increased prices of ingredients from suppliers, lowered cooking oil prices and tried to pool a 10 billion won subsidy fund for our partners, we had no choice but to raise the retail prices."