Chicken chain gets burned for misleading investors

Popular fried chicken chain Kyochon Chicken is under fire after the Fair Trade Commission (FTC) ruled that the company misled investors with false advertisements.

Kyochon is also facing accusations that it required its franchise stores to sign a contract with a specific vermin-control company, Cesco.

In addition, the FTC said Kyochon pushed its 950 franchisees to sign with Cesco, with which the company had been a partner since February 2009.

The FTC said Wednesday that the company deceived potential franchisees with advertisements that said shop owners would earn 25-35 percent of the sales revenues as net profit. FTC said the true figure fell between 11 percent and 18 percent.

Yonhap News Agency reported on Wednesday that Kyochon had threatened to cut supplies, or terminate or refuse to extend the franchisees’ ownership licenses if they did not sign with Cesco.

The FTC has ordered Kyochon to send written apologies to its franchisees, Yonhap reported.

The watchdog said it was inappropriate to order any harsher punishment apart from warning the company about false advertising, because the firm promptly expressed remorse and the false information had not been serious enough to warrant criminal charges.