This article was posted on the ChosunBiz RM Report site on May 11, 2025, at 5:21 a.m.
As inflation rises and consumer spending contracts, concerns in the industry are growing due to the government's movement to amend the Franchise Business Act. The recent amendment, designated as a fast-track (expedited processing) item by the National Assembly, aims to legally supplement the negotiation rights of franchise owners by granting them virtually the same rights to collective bargaining and unionization as workers.
According to the distribution industry on the 11th, the proposed amendment to the Franchise Business Act, designated as a fast-track item at the National Assembly on the 17th of last month, centers on granting franchise owners transaction rights similar to those of labor unions. The amendment aims to legally ensure the negotiating rights of franchise owners to secure fairness in transactions with franchisers and prevent unfair practices. Franchise owners expect that if the amendment passes, it will help prevent unilateral contract terminations and unfair transaction terms set by franchisers.
However, the amendment includes provisions that allow franchise owners to form organizations and states that if these organizations request negotiations with the franchiser regarding transaction terms, the franchiser must respond. If the franchiser fails to respond to the negotiation request, the franchiser will face sanctions such as corrective orders or accusations.
The convenience store industry is concerned that the passage of the amendment to the Franchise Business Act will make normal operations of franchise businesses difficult. A convenience store representative noted, "If owner organizations proliferate in each region to assert their demands to the franchiser, normal negotiations will be difficult, and operations could become paralyzed."
The bill passed the National Assembly's Administrative Affairs Committee in December 2023 and was directly referred to the plenary session under the leadership of the Democratic Party of Korea in May 2024, but it was discarded after failing to be presented. However, this year, with the opposition party, including the Democratic Party of Korea, passing the fast-track designation agreement in the plenary session, it has resurfaced.
Once designated as a fast-track item, it will be presented to the plenary session after a period of 180 days in the relevant standing committee and 90 days in the Legislation and Judiciary Committee. A vote can then take place within 60 days. With ample time remaining in the 22nd National Assembly's term and the likelihood of a regime change in the upcoming June presidential election being extremely low, the bill is likely to be enacted.
The Korea Franchise Association argued, "This amendment carries a high risk of unnecessary disputes, as multiple franchisee organizations may abuse their negotiation request rights or excessive competition may be fueled among organizations. Measures to reduce such side effects must be adequately supplemented."
Currently, the convenience store business is in a significantly worsened state due to the impact of the economic recession and rising prices. According to the Ministry of Trade, Industry and Energy's 'March Retail Sales Trends,' convenience store sales in the first quarter fell by 0.4% compared to the same period last year. This is the first time since statistics were compiled in 2013 that quarterly sales have decreased. The sales growth rate for convenience stores, which exceeded 10% in 2022, has fallen to 8.1% in 2023 and 4.3% in 2024.
The industry is concerned that the passage of the amendment to the Franchise Business Act will make normal management activities difficult in an already saturated convenience store market. According to the Korea Convenience Store Industry Association, the number of stores of the top four convenience store companies (CU, GS25, 7-Eleven, Emart24) was 54,852 at the end of last year, a decrease of 28 from the previous year. This decline in store numbers is the first in 36 years since the introduction of the convenience store industry in 1988. In the first quarter, the operating profits of BGF Retail, which operates CU, and GS Retail, which runs GS25, fell by 31% and 22%, respectively, compared to the same period last year.
A representative of the Korea Convenience Store Industry Association stated, "Fundamentally, the franchiser and franchise owner are in a relationship as business partners, not as employer and employee," adding, "The current amendment is insufficient regarding the conditions for establishing franchise owner organizations, which could lead to a proliferation of multiple organizations."