Subway Korea faces punishment for violating franchise law

Subway Korea. Korea Times file

By Dong Sun-hwa, Park Si-soo

Subway's Korean unit will be punished for violating the nation's franchise law by terminating a contract with an outlet for dubious reasons.

The Fair Trade Commission's Seoul office will soon convene a meeting to decide on the penalty.

The conclusion was based on a FTC investigation launched after the owner of a Subway outlet in Anyang, Gyeonggi Province, claimed Subway Korea had informed him of the contract termination for unclear reasons, with no Korean measures to challenge the decision.

Subway claimed the termination was “grounded” because the owner had ignored agreed-upon hygiene and ingredient rules. But the FTC took the side of the owner, who said the “true reason” for the termination was not the alleged violation of the rules, but to bring a profitable outlet under its direct control.

The disputed outlet had a flying start in terms of monthly sales ― it posted 27 million won ($22,980) shortly after opening and soon rocketed to 41 million won.

The FTC also found a problem with Subway's “unfair” dispute settlement system, which only accepts complaints written in English and via the American Dispute Resolution Center (ADRC).

The owner said the policy had placed him at a disadvantage in challenging its decision and ADRC had made a ruling favorable to Subway in August.