Amid COVID-19 Regional Spread... 84,548 Franchise Stores Join 'Good Franchise' with Fee Exemptions

Chairman Jo Sung-wook of the Korea Fair Trade Commission. (File photo) [Image source=Yonhap News]

[Sejong=Asia Economy Reporter Joo Sang-don] It has been revealed that 87 franchise headquarters are participating in the 'Good Franchise' movement by reducing or exempting royalties, providing food material support, and offering advertising and promotional support amid the regional spread of the novel coronavirus infection (COVID-19).

On the 23rd, Cho Sung-wook, Chairman of the Fair Trade Commission, held a meeting with the CEO of Mega Coffee and the franchise owner of Mega Coffee Sejong Dajeong branch, who are participating in the Good Franchise movement, and urged, "I hope more franchise headquarters will join the Good Franchise movement." The meeting was held online via video conference in accordance with the government's strengthened social distancing measures.

Recently, due to the regional spread of COVID-19, outings, dining out, and gatherings have decreased, causing many franchise owners to suffer from declining sales. In response, with the spirit of coexistence that "the headquarters can only survive if the franchise stores survive," as of the 17th, 87 franchise headquarters (with 84,548 affiliated franchise stores) have joined the Good Franchise movement.

The franchise headquarters are supporting franchise owners in various ways, including ▲reducing or exempting franchise fees (royalties), ▲providing food material support, ▲advertising and promotional support, ▲support for temporary closures, ▲financial support such as rent assistance, and ▲disinfection support.

Regarding royalty reduction or exemption, 31 franchise headquarters (with 12,690 affiliated franchise stores) have decided to temporarily exempt or reduce royalties paid by franchise stores to the headquarters for brand usage and other reasons. For example, the shabu-shabu specialty store Chaesundang recently exempted royalties (around 5% of sales) for two months (February to March) after franchise stores' sales dropped by up to 50% due to the COVID-19 situation. Additionally, automobile maintenance franchise headquarters Blue Hands (1,374 stores) and Auto Q (800 stores) decided to reduce royalties by 50% for three months (amounting to 660,000 to 990,000 KRW) for all franchise stores and exempt March royalties for stores in the Daegu and Gyeongbuk regions to promote coexistence. The exemption scale amounts to approximately 1.41 billion KRW for Blue Hands and about 820 million KRW for Auto Q.

There are also 21 franchise headquarters (with 11,572 affiliated franchise stores) that provide free or discounted food materials purchased by franchise stores from the headquarters. Chicken specialty store Chicken Maru reduced the price of chicken supplied to franchise stores by 5-10%. Chicken Maru has previously reduced chicken supply prices during outbreaks of avian influenza (AI) and heatwaves to ease the burden on franchise owners.

To increase declining sales due to COVID-19, 19 franchise headquarters (with 16,743 affiliated franchise stores) actively support franchise owners' advertising and promotional expenses. Pizza specialty store 7th Street Pizza has borne the cost of weekday discount promotions on delivery apps since February, considering the decrease in in-store sales and increase in delivery orders due to COVID-19, resulting in franchise stores' sales recovering to above normal levels. Beer specialty store Garten Beer allowed franchise owners to complete franchise training for the delivery-focused franchise Chicken Pong 237, operated by the headquarters, and enabled delivery sales if desired.

18 franchise headquarters (with 51,263 affiliated franchise stores) support franchise stores that must close due to visits by confirmed COVID-19 patients or voluntary closures due to sales declines. Kimbap specialty store Yamsaem Kimbap decided to pay 1.6 million KRW in rent to franchise owners who had to close for two weeks due to self-quarantine after a confirmed COVID-19 patient visited their store.

There are also 16 franchise headquarters (with 28,967 affiliated franchise stores) that directly support franchise owners facing difficulties due to sales declines through financial aid. Jeonggwanjang operates a support system that recognizes sales of products sold on online shopping malls as sales of franchise stores in the consumer's address area. Due to COVID-19, online shopping mall sales increased by more than 200% compared to the same period last year, increasing benefits for franchise owners.

Additionally, 47 franchise headquarters (with 58,795 affiliated franchise stores) have supported franchise stores and local communities by providing disinfection supplies or donating to affected areas. Kyochon Chicken donated 200 million KRW to the Daegu branch of the Korean Red Cross, and Mexicana Chicken donated 100 million KRW to the Daegu area. Yeonan Sikdang donated 10,000 cockle bibimbap meals to medical staff fighting COVID-19 on the front lines.

Chairman Cho said, "Despite the difficulties franchise headquarters are facing due to sales declines caused by COVID-19, their active efforts for coexistence are a positive sign that the impact of COVID-19 can be overcome early." He added, "With the supplementary budget approved by the National Assembly, policy fund support for 'Good Franchises that alleviate the burden on franchise owners' is now possible. I urge more franchise headquarters to join the Good Franchise movement so we can overcome the COVID-19 crisis early."