64% of Franchise Brands Have No Directly Operated Stores... Fair Trade Commission to Push for Mandatory Operation Legislation

Fair Trade Commission Announces 2020 Franchise Business Status

[Sejong=Asia Economy Reporter Joo Sang-don] It was revealed that 64% of franchise brands did not operate directly managed stores last year. The Fair Trade Commission is pushing for legislation to mandate the operation of directly managed stores before starting franchise businesses, ensuring the business model is verified in advance.

On the 4th, the Fair Trade Commission announced the '2020 Franchise Business Status' report containing these details.

According to the report, the number of franchisors increased by 8.3% year-on-year to 5,602. The number of brands also rose by 11.7% to 7,094. The Fair Trade Commission evaluated this as a result of franchisors actively striving to start businesses despite the COVID-19 crisis.

The number of franchisors grew fastest in the wholesale and retail sector by 15.8%, while the number of brands increased most rapidly in the food service sector by 12.8%.

The number of franchise stores was highest in the food service sector with 129,126 stores (49.9%), accounting for the largest share of all franchise stores. This was followed by the service sector at 27.6% (71,476 stores) and wholesale and retail at 22.5% (58,287 stores). While the number of franchise stores in the food service and wholesale and retail sectors increased by 5.3% and 3.3% respectively compared to the previous year, the service sector saw a 4.8% decrease.

The number of brands not operating directly managed stores was 4,522, meaning 63.7% of all brands did not operate directly managed stores. This proportion increased from 59% the previous year.

By sector, the service sector had the highest rate of not operating directly managed stores at 66.2%, followed by the food service sector at 63.4%, and wholesale and retail at 59.1%.

The Fair Trade Commission is promoting legislation to mandate the operation of directly managed stores before franchising to prevent damages to franchisees caused by imitation brands and to verify business models in advance. Including this, the commission plans to submit a revision of the 'Fair Transactions in Franchise Business Act' to the National Assembly this month, which will also include measures such as the franchisee business association registration system and prior consent for advertising and promotions.