Hanam F&B Unilaterally Added 26 Mandatory Items After Signing the Contract
Terminated Franchise Agreement When Franchisee Purchased Supplies Independently
The headquarters of Hanam Dwaeji Jip has been fined for designating additional mandatory items that were not specified as essential in the franchise agreement, then halting the supply of meat and even terminating contracts with franchisees who did not comply.
On August 17, the Fair Trade Commission announced that it would impose a corrective order and a fine of 80 million won on Hanam F&B, the franchise headquarters of Hanam Dwaeji Jip, for violating the Franchise Business Act. The violations include restricting business partners, suspending the supply of goods, and terminating contracts.
The Fair Trade Commission imposed a corrective order and a fine of 80 million won on Hanam F&B, the franchise headquarters of Hanam Dwaeji Jip, for violating the Franchise Business Act. Yonhap News
Hanam F&B is accused of unlawfully designating mandatory items in its contract with franchisee A, who operated two stores between 2020 and 2022. When franchisee A did not comply with these requirements, Hanam F&B stopped supplying meat and other essential items and ultimately terminated the contract.
According to the Franchise Business Act, in order to designate an item as mandatory, it must be objectively recognized as essential for maintaining the uniformity of the franchise business. This information must be disclosed in advance through the initial disclosure document and included in the franchise agreement.
However, Hanam F&B was found to have unilaterally designated 26 additional mandatory items-including kimchi, somyeon (thin wheat noodles), broth, and delivery containers-that were not specified as essential in the disclosure document or franchise agreement. The company did so without entering into a new franchise agreement or reaching a separate agreement with franchisee A. Subsequently, Hanam F&B stopped supplying meat, pickled garlic leaves, and charcoal-items necessary for operating a barbecue restaurant-because franchisee A did not purchase the additional mandatory items from designated suppliers.
As a result, franchisee A purchased meat from other sources to continue operating the restaurant. In response, Hanam F&B terminated the franchise agreement with franchisee A, citing a breach of contract obligations.
The Fair Trade Commission stated, "We have strictly sanctioned the act of forcing franchisees to purchase mandatory items that were not incorporated into the franchise agreement, as well as the act of unjustifiably suspending the supply of essential goods or terminating franchise agreements." The Commission added, "To protect the rights and interests of franchisees, we will continue to monitor unfair practices by franchisors, such as the inclusion of mandatory items in franchise agreements, unjustified refusals to provide business support, or unfair contract terminations. If violations are confirmed, we will take strict action."
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