BBQ bows to antitrust agency
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Genesis BBQ Vice Chairman Kim Tae-cheon speaks during a press conference at the firm’s store in Seoul, Thursday. The fried chicken franchise said it will make public its profit margins and treat its franchisees better. / Yonhap
Fried chicken chain will disclose profit margins
By Lee Hyo-sik
Genesis BBQ has pledged to make public its profit margins and treat its franchisees better, bowing to mounting pressure from the nation’s antitrust agency.
Korea’s largest fried chicken franchise said Thursday that it will slash the number of items its franchised stores are required to buy from headquarters and set up an ad-hoc committee to reflect the voices of franchisees in management decisions.
The Fair Trade Commission (FTC) has pressed it to address its controversial business practices.
In recent months, BBQ has been struggling to cope with one public relations disaster after another because of suspicions about the owner family’s possible tax evasion, its failed attempt to raise fried chicken prices and its mistreatment of store owners.
In a hurriedly arranged press conference, BBQ Vice Chairman Kim Tae-cheon said the company will introduce measures to ease the financial burden on its franchisees and make its management more transparent.
On Friday, company Chairman Yoon Hong-geun and other heads of the nation’s top franchises are scheduled to meet FTC Chairman Kim Sang-jo. Kim is widely expected to place greater pressure on Hong and others to do more to improve the wellbeing of their affiliated stores, or face action from the FTC.
“We will actively follow government policies aimed at improving business transactions between the headquarters and franchisees,” Kim said. “So we have accepted most of the suggestions made by our affiliated stores. To lessen their financial burden, we will reduce the number of items they have to buy from headquarters.”
The fried chicken chain also plans to give more management leeway to store owners so they can make more decisions at their discretion.
“We will disclose our profit margins as part of our efforts to share more information with our franchisees,” the vice chairman said. “This decision may send a ripple effect across the franchise industry. However, we decided to take this unprecedented move to show our resolve to create a fairer business environment.”
BBQ also plans to set up a consultative committee with representatives of affiliated store owners to make more concerted decisions on pricing, marketing and other important issues.
“We will also introduce a royalty program to create a sound and transparent franchise business model and give store owners rights to buy company shares when it goes public,” Kim said. “BBQ will bolster its corporate social responsibility programs with its franchisees to give back more to local communities.”
The company makes money by supplying most of the items to its stores at higher than market prices, the primary source of conflict between the headquarters and franchisees. BBQ wants to collect a certain percentage of stores’ sales as royalties while reducing the number of items they are obliged to buy from it.