The Fair Trade Commission has decided to issue a corrective order and impose a fine of 5 million KRW on the franchise headquarters ‘Jibeuro Nakgopsae,’ which specializes in delivery of stir-fried octopus, intestines, and shrimp, for providing exaggerated cost margin information to franchisees.
According to the Fair Trade Commission on the 19th, the ‘Jibeuro Nakgopsae’ franchise headquarters provided 11 prospective franchisees with false and exaggerated cost margin rate information from January to September 2020. The headquarters provided prospective franchisees with a cost margin rate table stating that the profit from selling their octopus, intestines, and shrimp stir-fry was 43.7% of the selling price, but failed to provide the basis for this calculation. As a result, the franchisees requested a refund of the franchise fee in December 2020, but the headquarters refused.
Additionally, from January to August 2020, the headquarters did not issue franchise contracts and disclosure documents to six franchisees before contract signing. From January to March 2020, the franchise contracts presented to five franchisees omitted obligations such as franchise fee deposit and compensation for damages. Furthermore, despite never directly entering into franchisee damage compensation insurance contracts, the headquarters directly received franchise fees from seven franchisees into its own bank account from January to August 2020.
The Fair Trade Commission stated that by imposing the corrective order and a fine of 5 million KRW on Nakgopsae, it has made clear that acts such as influencing prospective franchisees’ decisions to enter into franchise contracts with false or exaggerated information, or failing to provide disclosure documents and franchise contracts in advance during the contract process, constitute violations of the law.
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