South Korea’s FTC to Ease Requirements for Franchisee Collective Bargaining, Formally Announces Enforcement Decree Revision — BigGo Finance

Joo Byung-ki, chairman of the Korea Fair Trade Commission (KFTC), acknowledged that certain requirements in the proposed enforcement decree for the Franchise Business Act—which defines franchisees’ collective bargaining rights—were set excessively, and announced that a revised version would be prepared.

Chairman Joo made the remarks on the 24th during a plenary session of the National Assembly Political Affairs Committee, responding to questioning from Democratic Party lawmaker Lee Kang-il, who argued that the enforcement decree draft put forward by the KFTC for public notice effectively neutralizes the intent of the parent law. “In trying to focus on a very small number of large franchise networks while preventing the indiscriminate proliferation of associations among small franchises, I agree that the weighting for the 30-to-300 location range has become excessive,” Joo said. “This is not a finalized proposal, and we intend to revise it after hearing feedback.”

The National Assembly passed an amendment to the Franchise Business Act last December that requires franchisors to engage in negotiations when a franchisee association requests consultation on trading terms, prohibiting refusal without justifiable cause. Immediately after the bill’s passage, the KFTC began drafting the subordinate enforcement decree that sets out registration requirements and procedures for associations eligible to engage in such consultations.

Under the proposed rules, a franchisee association with at least 10% of all franchisees in a network—or at least 1,000 members—would be recognized as having official representational standing. Once registered, the association could formally request consultation on the franchisor’s major business policies, but would be barred from requesting renegotiation on the same issue within 180 days. Additionally, associations with fewer than 30 members would be ineligible for registration, effectively excluding small franchisors with fewer than 30 locations from the law’s application.

Lawmaker Lee itemized the limitations of the draft enforcement decree. He noted that the 30-member minimum threshold—which excludes small franchisors with fewer than 30 locations—removes 88% of all franchisors from bargaining obligations. He also called for revisions to the 180-day renegotiation restriction, the 1,000-member ceiling requirement, and the representation clause that limits assistance from experts such as certified franchise consultants, arguing these provisions could be exploited by franchisors as a means to evade dialogue.

The issue of franchisors outright refusing negotiation requests was also raised. “Of 32 cases where negotiation was requested, dialogue was refused in 31,” Lee said. “The very purpose of the law’s amendment is to get parties to the negotiating table.” The intent, he explained, is not to force franchisors to reach an agreement, but to ensure that when franchisees request talks, the franchisor must first sit down at the bargaining table.

Chairman Joo responded that each provision would be reviewed for potential for abuse. “We will refine the bill with full consideration of a mutually beneficial structure between franchisors and franchisees,” he added.

Meanwhile, the franchise industry is strongly opposing the enforcement decree provision that grants official representational standing to associations representing 10% or more of all franchisees in a network. The concern is that a 10% membership threshold is too low to represent the views of the entire franchisee base and could lead to a proliferation of competing associations. Industry voices warn that if multiple associations present conflicting demands, franchisor decision-making could be delayed, causing serious disruptions to business operations.

The decision to revise the enforcement decree signals a shift in policy direction regarding the balance of power between franchisees and franchisors. If the KFTC eases requirements to substantively guarantee franchisees’ collective bargaining rights, franchisees of small and mid-sized franchise networks that have been excluded from bargaining could form associations and enter negotiations with their franchisors. On the other hand, the franchise industry continues to voice concerns about the management burden from association proliferation, drawing attention to where the KFTC’s revised proposal will ultimately strike a compromise.