BBQ, bhc, Kyochon face antitrust probes over excessive franchise fees

By Kim Jae-heun

Bhc Chairman Park Hyeon-jong

BBQ, bhc, Kyochon and other fried chicken franchise operators are facing antitrust probes to determine if they are engaged in any unfair practices to collect higher fees from their franchisees, leading to steep price hikes, according to the Fair Trade Commission (FTC), Tuesday.

As part of government efforts to curb rises in prices of various consumer goods, the antitrust agency started conducting inspections on trade practices of 200 franchise businesses including BBQ Genesis, bhc and Kyochon F&B as well as their 12,000 franchisees, July 7. The probe is expected to continue through Sept. 27.

The FTC is targeting fried chicken franchise operators, which are said to be making big profits by collecting “excessive” fees when supplying raw chicken and other ingredients to their franchisees. It plans to ask the franchisees about the head companies' possible violation of the Franchise Act, their use of standard contracts implemented by the government and the status of essential orders restaurant owners have to make.

BBQ Genesis Chairman Yoon Hong-geun

BBQ, bhc and Kyochon F&B are no strangers to fair trade inspections.

“The FTC inspected us on the same issue two years ago. This is an annual practice that all franchise companies go through. We will accept the inspection as it is our responsibility,” a bhc official said.

“It is the FTC's job to keep an eye on our business, whether we are doing well or not,” a BBQ Genesis official said. “People may think the government is pressuring fried chicken franchise firms to lower prices but the inspection has been conducted every year.”

Kyochon F&B said it had no official comment on the inspection and it will fully cooperate with the government.

The FTC's stance is different this year. It is planning to come up with a new system to improve franchisees' business environment based on the opinions they give.

Kyochon F&B Chairman Kwon Won-kang

“There are cases when franchise firms force restaurant owners to over purchase mandatory items from the headquarters or raise the price of each item excessively, which results in price hikes of fried chicken as well,” a FTC official said. “We are looking into improving various systems and related laws with respect to franchise contracts.”