Franchisors in South Korea may soon be required to compensate franchisees for losses caused my mismanagement. This follows a number of high-profile scandals which encouraged consumers to boycott their chains.
South Korea’s Fair Trade Commission has measures to protect franchisees from te effects of such mismanagement. Under the new guidelines, franchisors wille be obliged to have compensation plans written into their contracts. 50 of the country’s biggest franchising companies will be required to disclose the price of all items that it requires to be purchased by the franchisee from food ingredients to paper cups. Franchisors taking any retaliatory action against franchisees will face stiff penalties.
The Commission’s chairman, Kim Sang-jo, said, “The franchise business is an important means of creating jobs. While [the franchise businesses] has exploded externally, internally, there are many issues that are concerning.”
