Seoul City Requests Franchise Headquarters to Submit Regular Amendments to Information Disclosure Documents by End of April...Fines for Non-Compliance

Registration of Updated Information Including Balance Sheet and Sales Revenue of Operating Franchise Stores as of the End of Last Year

[Asia Economy Reporter Lim Cheol-young] Approximately 2,000 franchise headquarters in Seoul must complete the ‘Regular Change Registration of the Disclosure Document’ by the 30th of this month.

According to Seoul City on the 8th, franchise headquarters must register changes to updated information such as the balance sheet, income statement, number of operating franchise stores, and sales within 120 days after the end of each business year. The ‘Franchise Business Disclosure Document’ is a document that prospective franchisees preparing to start a franchise can check essential information before signing a contract, including the franchise fees, interior costs, contract and business-related conditions borne by the franchise, the financial structure of the headquarters, and the number of operating franchise stores. If the deadline is not met or the information is not updated, registration cancellation or a fine of up to 10 million KRW may be imposed.

In March, Seoul City conducted online training for franchise headquarters regarding the preparation method, submission documents, revised laws, improved screening criteria, and administrative sanctions for legal violations related to the regular change of the disclosure document. Additionally, in April, Seoul City plans to continuously encourage change registration through mail and email.

Since 2019, Seoul City has been entrusted by the Fair Trade Commission to handle the ‘Franchise Business Disclosure Document Registration’ and processed the largest number of disclosure document registrations among local governments last year (4,884 cases from 2,682 brands).

Meanwhile, Seoul City plans to create an environment where prospective franchisees can start their businesses stably through continuous monitoring along with encouraging regular changes to the disclosure document.

Park Ju-seon, Seoul City’s Fair Economy Officer, said, “Despite the impact of COVID-19, new franchise registrations (based on disclosure document registration) increased by about 20% last year. Due to the market’s easy entry characteristics, incorrect information provided by franchise headquarters can directly harm prospective franchisees. Therefore, franchise headquarters applying for regular changes must strictly adhere to the deadline and submit error-free disclosure documents.”