SPC, CJ, and Other Franchises Cannot Impose 'Penalty Fees' on Voluntarily Closed Franchise Stores

Prime Minister Chung Sye-kyun is striking the gavel at the Cabinet meeting held at the Government Seoul Office in Jongno-gu, Seoul, on the morning of the 21st. Photo by Hyunmin Kim kimhyun81@

[Asia Economy Reporter Kwangho Lee] From now on, franchise headquarters cannot impose business penalty fees even if a franchise with poor sales closes within one year. Starting next month, 950 large corporations must provide reemployment services to retirees. The grace period for the private land price ceiling system for redevelopment projects will also be extended by three months.

On the 21st, the government held a Cabinet meeting at the Government Seoul Office, presided over by Prime Minister Chung Sye-kyun, and deliberated and approved 24 presidential decree drafts and 5 general agenda items, including these matters.

First, the "Amendment to the Enforcement Decree of the Franchise Business Act" aims to ease the burden of store closures for franchises with poor sales. This is to relieve franchise owners who have already suffered losses from having to continue their business reluctantly due to penalty fees or bear double losses by paying penalty fees when closing their stores. Specifically, even if the sales of a franchise intending to close within one year from the start of business fall below the lower limit of the expected sales range presented by the franchise headquarters before the contract, the franchise headquarters cannot impose penalty fees.

The Fair Trade Commission plans to revise the "Standard Form of Franchise Business Transaction Disclosure Document" to reflect the amended enforcement decree. Additionally, to ensure the new system is quickly established on the ground, related educational materials will be prepared and distributed, and the amendments will be actively promoted.

The government also approved the "Enforcement Decree of the Employment Insurance Act" and the "Enforcement Decree of the Elderly Employment Act," under the jurisdiction of the Ministry of Employment and Labor. The Enforcement Decree of the Employment Insurance Act temporarily raises the support level of employment maintenance subsidies up to 90% for small and medium-sized enterprises affected by COVID-19. From April to June, employers who implemented leave or furlough and paid allowances will receive the increased employment maintenance subsidies.

The Enforcement Decree of the Elderly Employment Act stipulates specific details related to the mandatory provision of reemployment support services by large corporations, effective from the 1st of next month. Employers with 1,000 or more employees must provide reemployment, entrepreneurship education, or job placement services to workers aged 50 or older who leave involuntarily. Approximately 950 large corporations are subject to this, and it is expected that about 36,000 workers annually will have opportunities to prepare for new jobs after retirement.

Additionally, the "Partial Amendment to the Enforcement Decree of the Housing Act," which extends the grace period for the private land price ceiling system for redevelopment projects from the 28th of this month to July 28th by three months, was also processed. Last October, when announcing the implementation of the price ceiling system, the government decided to grant a six-month grace period for complexes that had received management disposition plan approval related to redevelopment projects such as reconstruction. Due to the COVID-19 situation, an additional three months of grace period has been granted.

Furthermore, the Ministry of Justice approved the "Amendment to the Regulations of the Ministry of Justice Inspection Committee," which increases the participation of external personnel in the inspection committee handling misconduct of affiliated staff, including prosecutors, and expands the scope of deliberation.

The "Enforcement Decree of the Act on the Promotion and Foundation of Drone Utilization," which requires the establishment of a five-year "Basic Plan for the Promotion and Development of the Drone Industry," was also passed to foster the drone industry.

Meanwhile, the Ministry of Trade, Industry and Energy reported plans to begin construction of the Nuclear Power Plant Decommissioning Research Institute in the second half of next year. The research institute, with a construction cost of 322.3 billion KRW, will function as a testbed for technology development and commercialization for dismantling permanently shut-down nuclear power plants, as well as for workforce training. The main institute (research on dismantling pressurized water reactors) will be built on approximately 73,000㎡ in the border area between Busan and Ulsan, and the branch institute (research on dismantling heavy water reactors) will be built on 24,000㎡ in the Na-a Industrial Complex in Gyeongju.