Four Franchise Owners Plan to File Damages Lawsuit This Month
Headquarters' Chicken Supply Shortage Cited as Cause of Losses
Exclusive Supply Policy Under Scrutiny by Fair Trade Commission
Some Kyochon Chicken franchise owners have announced plans to file a lawsuit for damages, claiming that the headquarters did not supply enough chicken to meet their orders, resulting in decreased sales. Kyochon Chicken maintains that it has made every effort to resolve supply disruptions.
According to industry sources on September 7, four Kyochon Chicken franchise owners plan to file a damages claim with the court as early as this month. The total amount claimed by the four plaintiffs is approximately 100 million won.
These franchise owners allege that from November last year to July, the headquarters supplied only about 40% of the chicken they ordered, causing financial losses. They also argue that, since the headquarters requires franchisees to purchase chicken exclusively from them, it was impossible to secure supplies through other channels.
Previously, in February, about 100 franchise owners held a rally at the Kyochon F&B headquarters in Pangyo, demanding a solution to the unstable chicken supply. At that time, Lee Sangro, head of domestic business at Kyochon F&B, reportedly met with the franchisees and signed a written commitment stating that the headquarters would provide compensation if the annual chicken supply fell below a certain level. However, the franchise owners claim that the supply issues persisted and that compensation was never provided.
Kyochon Chicken responded, "We are making efforts to keep our promises," and explained, "The shortage of chicken supply is due to conditions in the wholesale market and seasonal issues such as avian influenza (AI) during the winter." The company further noted that its main products use chicken parts such as drumsticks and wings, but because wholesalers have difficulty handling other parts like chicken breast, they have restricted overall chicken supply, which has also affected availability.
Separately from the lawsuit, the Fair Trade Commission is investigating whether Kyochon Chicken's requirement for franchisees to purchase chicken from the headquarters, while failing to supply it adequately and taking no action, constitutes a violation of the Franchise Business Act. A Kyochon Chicken representative stated, "From the headquarters' perspective, if franchisees use independently sourced chicken, there is a higher risk of providing inconsistent products to customers, so we enforce strict standards on this matter." The representative added, "We understand that similar regulations are in place at other franchise headquarters as well, not just at Kyochon."
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