FTC launches probe of Kychon F&B ahead of IPO
Kyochon F&B executives speak online about the company's IPO plan from its headquarters in Seoul on Oct 22. / Korea times file
By Kim Jae-heun
The Korea Fair Trade Commission (KFTC) is investigating the country's largest fried chicken franchise Kyochon F&B, which plans to go public next Thursday.
Kyochon has been accused of forcing its franchisees to bear the costs of remodeling restaurants across the country. The franchise dealers requested a mediation of the dispute from the Korea Fair Trade Mediation Agency, but it was rejected.
This is not the first time the chicken franchise has been accused of unfair trade practices ― similar complaints arose in August and October. Kyochon received a warning in the first case and was cleared of suspicion in the second. If Kyochon is found guilty this time, the decision might affect its initial public offering (IPO) plan.
There are already concerns because of the high expectations for Kyochon's business; no food and beverage (F&B) firm has achieved success after going public.
MP Group, which operated Mr. Pizza, took an indirect way by merging with special-purpose acquisition companies to go public on the secondary Kosdaq market, but its business was suspended in 2017. MP Group former Chairman Jung Woo-hyun was arrested for embezzling 15 billion won and his company was delisted.
Kyochon needs to improve its reputation in the market to move forward with a successful IPO. Last year, the Korea Consumer Agency surveyed people's satisfaction with eight top local fried chicken franchises and Kyochon ranked last.
Meanwhile, the top antitrust watchdog recently finished its investigation of BHC, another popular fried chicken franchise here, and it will soon make discipline orders.
BHC is accused of shifting financial burdens, including ad fees, onto its franchisees. The franchise has also reportedly breached the franchise contract with some dealers unilaterally and even halted supplying important ingredients to those going against headquarters.
KFTC Chairwoman Joh Sung-wook said she will take stern action against BHC once the investigation is completed.
The main reason the antitrust watchdog is bent on restricting the fried chicken business is because it is the most common franchise in Korea and the KFTC believes unfair trade practices are widespread.
The government is also planning to revise the franchise act to prevent F&B firms from abusing their power over franchisees.