480 Myeongnyundang Franchise Owners Support Headquarters as "Model of Win-Win Cooperation"

480 Franchise Owners Nationwide Submit Petition in Support of Headquarters

As controversy over private lending has arisen, 480 franchise owners from across the country have submitted a petition in support of Myeongnyundang, the operator of the unlimited refill pork rib franchise "Myeongnyun Jinsa Galbi."

Myeongnyundang held a 'Franchise Store Monthly Rent Support Win-Win Agreement Ceremony' on August 20 at Myeongnyun Jinsa Galbi Gangdong-gu Office Station Branch, providing monthly rent support worth 2.94 billion won.
[Photo by Myeongnyundang]

On September 29, the Myeongnyun Jinsa Galbi Franchise Owners' Association stated in its petition, "It is difficult for self-employed individuals to obtain bank loans." The association added, "We have received interest-free loans through affiliates of the headquarters or borrowed funds at relatively low interest rates through registered private lending companies to start our businesses, and have also received support for operating funds."

The association further explained, "Currently, more than 500 franchise owners are enduring the economic downturn thanks to monthly rent support from the headquarters." It added, "Since the win-win agreement in December 2019, practical support has continued, including two rounds of monthly rent support, conversion to interest-free loans, and full exemption of franchise owner contributions."

According to the association, Myeongnyundang provided a total of 35 billion won in interest-free loans to 361 franchise locations over four years starting in 2018. Since 2019, the headquarters has also fully covered the costs of nationwide advertising, discount coupons, and promotional events. The accumulated marketing expenses borne by the headquarters amount to approximately 47.4 billion won.

Previously, the office of Park Sanghyuk, a member of the Democratic Party of Korea, revealed that Lee Jonggeun, chairman of Myeongnyundang, and his spouse Yoo Jinsook are the actual owners of 12 private lending companies. Chairman Lee holds a 100% stake in six companies and a 90% stake in three others. Ms. Yoo solely owns or holds a controlling stake in two companies. The couple and their related parties collectively hold a 65% stake in Myeongnyundang.

It has been reported that these private lending companies borrowed funds from Myeongnyundang and provided loans to franchise owners at annual interest rates in the mid-10% range. Myeongnyundang lent 88.2 billion won to these private lending companies, which is more than its net assets (83.7 billion won), and covered the shortfall by borrowing policy funds from the Korea Development Bank at annual interest rates of 3-4%. Assemblyman Park stated, "A thorough investigation is needed into the practice of splitting private lending company registrations and suspicions of unregistered private lending."

In response, Myeongnyundang explained, "We had been providing interest-free loans to franchise owners, but due to increased default risk during the COVID-19 period, we inevitably established private lending companies." The company further stated, "These private lending companies operated under subrogation agreements with Myeongnyundang, so there was no debt collection, and the claim that we borrowed policy funds at low interest rates and lent them out at high interest rates is not true."