[Legal Issue Check] Controversy Over Forcing "Extended Leave" on Competing Delivery Apps for Franchisees Participating in "Baemin Only"

The operator of Baedal Minjok, "Woowa Brothers" (hereafter referred to as Baemin), and the headquarters of Cheotgatjip Yangnyeom Chicken, "Korea 105," have come under fire after both franchise owners and several civic groups filed complaints with the Fair Trade Commission, alleging that the companies effectively forced franchise owners to participate in the "Baemin Only" promotion, thereby prohibiting them from using competing delivery apps. The controversy has deepened as the franchise headquarters directly announced that it would process participating franchisees as "on extended leave" on other delivery apps.

Baemin maintains that participation in or withdrawal from the promotion is entirely at the discretion of individual franchise owners. However, many franchise owners say they felt compelled to participate for fear of disadvantages such as "limited app exposure" if they chose not to join. They argue that forcibly blocking their exposure on competing apps constitutes another form of unfair business practice. Furthermore, concerns have been raised that the headquarters’ decision to handle the "extended leave" status directly with competing app operators-rather than simply requesting franchisees set it themselves-violates the essence of the Franchise Business Act and is an illegal measure.

On the 27th of last month, Jaehun Kim, Executive Director of Korea 1053 (left), and Jihun Kim, Head of Business at Woowa Brothers, are taking a commemorative photo after signing a business agreement at the Woowa Brothers headquarters in Songpa-gu, Seoul. Woowa Brothers

Request for Extended Leave Setting on Coupang Eats and Yogiyo..."Headquarters Will Handle Directly if Not Executed" Notice

According to the franchise industry on the 27th, the headquarters of Cheotgatjip Yangnyeom Chicken sent out an official notice titled "Request to Set Extended Leave on Other Platforms in Relation to Baemin Win-Win Partnership Promotion" to franchise owners participating in the promotion on the 25th.

The headquarters requested that owners set their stores to "extended leave"-rather than "preparing"-on competing platforms such as Coupang Eats and Yogiyo from the specified date until May 8, and included the customer service numbers and instructions for making this change in the notice.

The headquarters further announced, under the section "Measures for Non-Compliant Stores," that "For stores that have not set extended leave by the 26th, the headquarters will process extended leave settings en masse to ensure smooth promotion management."

The notice explained, "Due to the system structure of other platforms, there have been cases where operations resume automatically, without the franchisee’s knowledge, because of errors related to lifting extended leave, lack of awareness among in-store staff, or loss of account information. Therefore, to comply with the promotion’s operational requirements and prevent unnecessary misunderstandings, we believe it is necessary to convert to extended leave on other platforms, and thus we are making this request."

An official letter sent by the franchisor 'Korea 1053' of Cheokatchip Yangnyeom Chicken to franchisees. Law Firm YK

"They Claimed Promotion Withdrawal Was Voluntary...Direct Handling Is Illegal"

YK Law Firm, representing the Cheotgatjip Yangnyeom Chicken Franchise Owners’ Association (hereafter, the Association) in the complaint to the Fair Trade Commission, stated, "Even if a franchise owner agrees to participate in the promotion, the decision to actually take leave must be made and executed by the owner themselves." The firm emphasized, "Each business in the delivery app is an individual franchisee, and for the franchisor-a third party-to set extended leave on their behalf constitutes illegal intervention that goes beyond what the law allows."

YK Law Firm further stated, "Completely blocking the possibility for owners to change their minds about participating in the promotion and forcing them to comply directly contradicts Baemin’s explanation that 'participation and withdrawal from the promotion are left to the owners’ discretion.' This seriously infringes on the owners’ freedom of decision-making and is clear evidence of unfair trade practices under the Fair Trade Act, such as exclusive conditional transactions and de facto coercion of choice."

Hyun Minseok, partner attorney at YK Law Firm, commented, "Even if franchise owners have promised exclusive business with Baemin, actual implementation must be done by the owners themselves. The headquarters cannot directly force compliance. The act of headquarters processing extended leave settings on behalf of owners is itself illegal."

Attorney Hyun added, "Baemin claims that franchise owners can withdraw from the promotion at any time, but the content of the notice sent to owners shows that this claim is not true."

Hyun Minseok, Partner Attorney at YK Law Firm. Photo by Dongju Yoon

Previously, Baemin stated, "Participation in this promotion is determined by the voluntary choice of franchise owners, and even after joining, they can opt out at any time without any disadvantage."

Baemin added, "Given the fierce competition in the current market, it is impossible for a specific platform to use its superior position to force the headquarters to do anything, and claims of infringement on management autonomy are unfounded."

Regarding criticisms of illegality, the headquarters explained that the measure was taken both as a convenience for owners who have difficulty reaching customer service at other delivery apps to set extended leave, and also as a sanction for some owners who, after participating in the promotion, intentionally left their status as "open for business" on other platforms.

"Counterparty for Delivery App Transactions Is the Franchisee, Not the Headquarters"...Many Owners Wish to Withdraw

YK Law Firm believes this action by the headquarters contradicts Baemin’s assertion that "owners are participating voluntarily," and instead demonstrates that owners’ freedom of decision-making is being restricted by Baemin or the headquarters.

YK Law Firm stated, "Our primary intention is to question the voluntariness of the initial consent to participate in this promotion. The notice can serve as indirect evidence contradicting the voluntary nature of the owners’ initial consent, and we plan to submit it as supplementary material to the Fair Trade Commission."

They continued, "Secondarily, we also plan to argue that actions preventing owners from withdrawing their consent to participate in the promotion constitute a separate unfair trade practice, and will pursue both claims concurrently."

Attorney Hyun Minseok explained, "There are cases where people misunderstand the franchisor as the counterparty on delivery apps, but the franchisor only allows the use of the brand through a franchise agreement-the actual party receiving intermediary food delivery services is the franchise business owner, not the headquarters. Therefore, the decision to continue using a platform belongs to each owner, not the headquarters."

Attorney Hyun added, "While the headquarters may request owners who agreed to the promotion to make sure their stores are not shown as 'open for business' on competing delivery apps, communicating directly with the operators of those platforms to set extended leave is a clear illegal act and can be considered a form of third-party creditor interference."

He further stated, "If a creditor wants to enforce a claim, they must first request performance from the debtor and then secure a legitimate enforcement order, such as a court judgment or payment order, before proceeding. Even a creditor cannot bypass these steps and directly take collection actions against a debtor; doing so is, by itself, illegal."

Hyun Minseok, Partner Attorney at Law Firm YK. Photo by Dongju Yoon

Attorney Hyun stated that it is difficult to view franchise owners participating in the "Baemin Only" promotion as doing so of their own free will.

He said, "In the process of handling the Fair Trade Commission complaint, many franchise owners explained that they felt compelled to participate because if other owners joined the promotion and their discounts and support messages were displayed on the Baemin app, they feared losing out in brand competition if they were the only ones not participating."

Attorney Hyun added, "The fact that some owners did not set extended leave after receiving the request from the headquarters suggests that, although they formally agreed to participate in the promotion, they may not have genuinely done so voluntarily. If participation had been truly voluntary, there would be no reason not to set extended leave."

He continued, "Owners who did not set extended leave by the deadline (the 26th) after receiving the request from headquarters are likely to wish to withdraw from the promotion, or at least expressed such an intention to headquarters. For the headquarters, which has claimed participation or withdrawal is voluntary, to unilaterally process extended leave for non-compliant owners regardless of their intentions is contradictory."

He gave an analogy: "If a customer makes a reservation and puts down a deposit but does not show up on the day, the restaurant owner should simply accept that the customer does not intend to dine, not demand full payment for all reserved meals just because there was a deposit."

Even for owners who initially agreed to participate in the promotion, Baemin and the headquarters claim that they can withdraw at any time. Yet, to set a two-day deadline to request extended leave, and then directly process it for non-compliant owners, defies common sense.

On July 15, 2024, in front of the headquarters of Woowa Brothers in Songpa-gu, Seoul, representatives from Rider Union, Meeting of CEOs for Fair Platforms, and the Service Federation Delivery Platform Union held a press conference condemning and urging the withdrawal of the delivery fee increase by Baedal Minjok. Yonhap News

"Violation of the Fair Trade Act and Franchise Business Act"...Cheotgatjip Franchise Owners’ Association and PSPD File Consecutive Complaints

Woowa Brothers, the operator of Baedal Minjok, signed a strategic partnership memorandum of understanding (MOU) with Korea 105, the operator of Cheotgatjip Yangnyeom Chicken, on the 27th of last month, and since the 9th, has been running the "Baemin Only" program. Under this program, franchise owners receive a reduced intermediary commission rate-from the previous 7.8% to 3.5%-on the condition that they do not use other delivery apps and transact exclusively with Baedal Minjok. According to the headquarters, about 1,100 out of a total of approximately 1,200 franchisees are participating in the promotion, maintaining a participation rate of around 90%.

Previously, on the 20th, YK Law Firm, representing the Cheotgatjip Yangnyeom Chicken Franchise Owners’ Association, filed a complaint with the Fair Trade Commission against Woowa Brothers (the operator of Baedal Minjok) and Korea 105 (the franchisor), alleging violations of the Fair Trade Act and the Franchise Business Act.

YK Law Firm accused Woowa Brothers of violations under the Fair Trade Act, including: abuse of market dominance by a market-dominant enterprise through "exclusive conditional transactions excluding competitors" (Article 5, Paragraph 1, Subparagraph 5); "restrictive conditional transactions" as an unfair trade practice (Article 45, Paragraph 1, Subparagraph 7); and "unfair customer inducement" as an unfair trade practice (Article 45, Paragraph 1, Subparagraph 4).

Korea 105 was charged under the Fair Trade Act with "restrictive conditional transactions" (Article 45, Paragraph 1, Subparagraph 7) and "unfair customer inducement" (Article 45, Paragraph 1, Subparagraph 4), as well as under the Franchise Business Act with "provision of false, exaggerated, or deceptive information" (Article 9, Paragraph 1) and "unfairly restricting or limiting the price, business partners, transaction area, or business activities of franchisees with respect to goods or services handled by franchisees" (Article 12, Paragraph 1, Subparagraph 2).

On the morning of the 24th, participants at the press conference titled "Fair Trade Commission Report on Baemin Only Strengthening Monopoly and Infringing on the Rights of Small Business Owners and Consumers," held in the Areumdri Hall on the 2nd floor of the People's Solidarity for Participatory Democracy building in Jongno-gu, Seoul, raised placards criticizing the Baemin Only contract and shouted slogans. People's Solidarity for Participatory Democracy

On the 24th, People’s Solidarity for Participatory Democracy (PSPD), together with the Minbyun People’s Lawyers for a Democratic Society Civil Economy Committee, the National Franchisee Association, and the Association of CEOs for Fair Platforms, filed complaints with the Fair Trade Commission against Woowa Brothers and Korea 105 for violations of the Fair Trade Act and the Franchise Business Act, and held a press conference.

They reported that the "Baemin Only" contract between the two companies constitutes: (under the Fair Trade Act) "exclusive conditional transactions by a market-dominant enterprise" (Article 5, Paragraph 1, Subparagraph 5); "unfair exclusion of competitors" (Article 45, Paragraph 1, Subparagraph 3); "abuse of transactional position" (Article 45, Paragraph 1, Subparagraph 6); and (under the Franchise Business Act) "restrictive conditional transactions" (Article 12, Paragraph 1, Subparagraph 2); "abuse of transactional position" (Article 12, Paragraph 1, Subparagraph 3); and "unfair infringement of business territory" (Article 12-4).

With Baemin maintaining its position as the number one delivery app in the market with over 50% market share, the controversy is expected to grow as the headquarters sends out notices to process extended leave en masse on other apps to enforce contract terms-particularly as the promotion, which prohibits relatively weaker franchise owners from using other delivery apps, has already led to complaints to the Fair Trade Commission.

This content was produced with the assistance of AI translation services.