Park Jae-hyuk is a seasoned journalist who has provided comprehensive coverage of South Korea's corporate dynamics, economic policies, industry challenges and the global positioning of Korean companies. Based on the articles he has written since joining The Korea Times in 2016, his investigative approach has helped readers understand corporate governance, economic trends and business strategies shaping South Korea’s economy.
BHC fined W148 mil. for abusing franchisees
BHC chairman Park Hyun-jong
By Park Jae-hyuk
By Park Jae-hyuk
BHC has been fined 148 million won ($137,000) for allegedly abusing its franchised restaurant owners, the Fair Trade Commission (FTC) said Sunday.
The domestic chicken franchise's allegations are in stark contrast to its previous pledge of social contribution announced at a press conference last month, when it vowed to share its profits with franchisees and unemployed youths.
According to the antitrust authorities, the nation's No. 2 fried chicken franchise in terms of sales did not give enough money to 27 of its franchisees for renovations, who collectively spent 969 million won on upgrading their stores between the January 2016 and July 2017 period.
The nation's franchise law states franchise headquarters should pay at least 40 percent of the costs for store renovations if the headquarters demand their franchisees renovate their stores.
When the number of its franchised restaurants reached a saturation point in late 2015, BHC headquarters suggested its franchisees convert their regular stores specializing in deliveries into pubs focusing more on selling beer.
The company gave incentives to its employees, if they persuaded franchisees into remodeling their stores.
However, the franchiser only partially compensated the franchisees for the construction costs, so the FTC ordered BHC to give the 27 franchisees a total 163 million won, which was not given to them right after the renovation.
The FTC also found out that BHC headquarters belatedly informed its franchisees of its spending on ads.
The franchise law demands franchise headquarters disclose the information on sales promotion costs within three months after the end of the business year, if franchisees pay the costs.
BHC had its franchisees pay 2 billion won for sales promotions during the October to December 2016 period, but the company posted the related information on the website for its franchisees during May of last year ― two months later than the deadline.
“We expect our recent measure will eradicate franchisers shifting their responsibilities onto franchisees,” an FTC official said. “Franchisers are also expected to stop making unnecessary requests for the renovation of stores.”
In addition to the charges, the FTC investigated the chicken franchiser's allegations of unfairly pricing its ingredients, such as sunflower oil and raw chickens, but the authorities said the pricing policy does not go against the law.
BHC recently held meetings with its franchisees across the country to talk about a new menu, but the restaurant owners claimed that the sunflower oil and raw chickens supplied by the franchiser are too expensive compared to what other companies are charging their franchisees.
The chicken franchise company, which began its franchising business in 2004, had 1,395 stores as of the end of 2016. It posted 232.6 billion won in sales in 2016.