To Open a Franchise, Average Operating Period Must Be Short... "Will Make Startup Decisions More Cautious"

Fair Trade Commission Announces Administrative Notice on Partial Amendment to the "Standard Form of Franchise Business Transaction Information Disclosure"
"Verification of Franchise Store Operation Sustainability and Franchise Headquarters Soundness... Strengthening Startup Information Provision"

Mutual cooperation between headquarters and franchise stores is a key agenda item handled by the Fair Trade Commission. The Fair Trade Commission believes that if the franchise store startup review process becomes more rational, mutual cooperation between headquarters and franchise stores will become more active.
(Photo by Yonhap News)

[Asia Economy Reporter Moon Chaeseok] In the future, prospective franchisees will be required to include the average operating period of franchisees in the disclosure document.

The Fair Trade Commission announced on the 20th that it has prepared a partial amendment to the "Standard Form for Franchise Business Transaction Disclosure Documents" and will hold an administrative notice period from today until July 9.

The standard form notice provides guidance on the format and how to fill out the disclosure documents. This amendment is a follow-up measure to the revision of the "Enforcement Decree of the Fair Franchise Transactions Act" promulgated on the 28th of last month.

As per the revised enforcement decree, the disclosure document must now include the average operating period of franchisees and the support details provided by the franchisor for stable store operation. This is to reflect the newly revised immediate termination reasons in the standard form notice.

The notice newly establishes items such as ▲average operating period of franchisees ▲support details for stable store operation ▲organization of immediate termination reasons.

In particular, prospective franchisees can now see the average operating period of franchisees to better understand the sustainability of store operations, the soundness of the franchisor, and the market evaluation of the brand.

The specification of immediate termination reasons is also notable. Reasons such as spreading false information and leaking trade secrets or important information have been removed.

Cases where franchisees violate laws related to store operation and receive court judgments have been added as immediate termination reasons.

For reasons involving urgent harm to public health or safety, clarity and urgency requirements have been added.

Lee Soonmi, head of the Franchise Transaction Division at the Fair Trade Commission, said, "Once the administratively notified standard form notice is finalized, franchisors will be able to faithfully reflect the revised contents in the disclosure documents by referring to it. Through this, prospective franchisees will be provided with practically necessary information, enabling them to reasonably review and carefully decide on starting a business."

The Fair Trade Commission plans to finalize and implement the amendment after collecting opinions from stakeholders and related ministries during the administrative notice period, followed by a plenary meeting resolution and regulatory review.