Subway faces punishment for allegedly abusing franchisee

The Fair Trade Commission's main office in Sejong Government Complex / Korea Times file

By Kwak Yeon-soo

Subway is facing a punishment from the Fair Trade Commission (FTC) which is reviewing punitive measures against the U.S.-based sandwich franchise operator for mistreating a franchisee in Korea, the antitrust regulator said Sunday.

“We're still in the progress of reviewing punitive measures against Subway,” an FTC official said. “We will soon hold a meeting to decide on the penalty after further investigation.”

According to the FTC, a Subway franchise owner who operated a store in Anyang, Gyeonggi Province, filed a civil complaint in 2017 for being mistreated by Subway.

Subway is accused of violating the law on franchise businesses, as the company unilaterally ordered the franchisee to shut down his store. The owner claims the company cited “no compelling reason” for him to close down.

The owner surnamed Ji said that Subway ordered him to shut down his store, citing poor hygiene control and lack of ingredients.

Although he made amendments afterward, Ji was told to visit the New York headquarters and defend his position in English if he wanted to avoid closing down the store permanently ― which he claimed was unfair as he is not a fluent English-speaker.

The firm explained that it had warned the problematic store nine times for violating 26 regulations in the first nine months of 2017, but did not see any improvements. As a result, the headquarters decided to order the store to be shut down for the safety of customers.

This case was taken to the American Dispute Resolution Center, and the body concluded that closing down the store was reasonable.

“Forcing a franchise store to shut down without a compelling reason may violate the law on franchise businesses,” an FTC official said. “We will inspect whether the U.S.-based company required excessive hygiene protocols in order to deliberately close down the branch.”

Earlier on Oct. 22, FTC chief Joh Sung-wook said she would ensure domestic law is applied fairly against foreign companies accused of unfair business practices.