This article was published on the ChosunBiz RM report site on May 24, 2025, at 5:23 a.m.
Amid the designation of a revision to the Franchise Business Act granting collective bargaining rights to franchise owners as a fast-track (expedited processing) item by the National Assembly, Lee Jae-myung, the Democratic Party of Korea presidential candidate, also put forth a similar pledge, raising anxiety in the franchise industry.
While franchise owners welcome the measure as it aims to prevent unilateral exploitation by the headquarters and improve the self-employment ecosystem, the franchise industry expresses concerns over the inclusion of toxic clauses that could infringe upon normal business activities.
According to the distribution industry on the 24th, the revision to the Franchise Business Act centers on granting rights to franchise owners to form a collective that can request consultations from the headquarters by registering with the Fair Trade Commission or their respective city or provincial governor. It grants franchise owners collective bargaining rights similar to a labor union.
If the franchise headquarters fails to comply with the request for consultation from the franchise owners' association, it will face sanctions, such as corrective orders. The standards for the required subscription ratio or number of members to form an association, as well as the topics and frequency of consultations, will be determined by presidential decree.
The revision passed the National Assembly's Political Affairs Committee in December 2023 and was directly referred to a plenary session with the initiative of the Democratic Party of Korea last May, but faced failed introductions and was once discarded. However, it was reintroduced in June of the same year and designated as a fast track by opposition parties led by the Democratic Party of Korea in April of this year. Consequently, it will automatically be introduced to the plenary session after a period of 180 days in the standing committee and 90 days in the Legislation and Judiciary Committee, with a vote possible within 60 days thereafter. Given that there are about three years left in the 22nd National Assembly’s term, the bill is likely to be promulgated in the first half of next year.
Recently, Lee Jae-myung, the Democratic Party of Korea presidential candidate, included a commitment to strengthen the bargaining power of franchise owners, as well as agents, contractors, and online platform operators, in his top 10 pledges. This bolsters support for the passage of the Franchise Act amendment.
Franchise owners expect that with the introduction of collective bargaining rights, it will prevent unilateral contract termination by the headquarters and the imposition of unfair transaction conditions. Currently, there are no means to enforce compliance if the franchise headquarters ignores the consultation requests, and the complicated procedures, such as applying for dispute resolution through the Fair Trade Commission, impose a significant burden on the owners.
The Nationwide Franchise Owners Council said, "Strengthening the bargaining power of franchise owners will be a critical turning point for establishing fair transaction order," and noted that "(collective bargaining rights) will help rectify the power imbalance, which is a fundamental cause of illegality, unfairness, and irrationality, laying the foundation for a fair and healthy self-employment ecosystem."
On the other hand, the franchise industry worries that the normal business activities of the headquarters could be infringed upon. In particular, there are opinions that improvements are needed due to the inclusion of some toxic clauses in the revision.
First, the revision adopts a 'registration system' that allows franchise owners to form associations as long as certain criteria are met, which could lead to a proliferation of multiple associations. Thus, the industry argues that when the contents of consultations are the same or similar for multiple associations, they should be allowed to negotiate in one process at once to reduce unnecessary workload.
Furthermore, according to the revision, if an owners' association abuses its rights to request consultations to unfairly interfere with the headquarters' management, the headquarters will have no means to respond. This raises significant concerns that management could be stifled and that damage could be inflicted on other franchise locations due to the deterioration of brand image. The industry demands the introduction of relevant clauses allowing for the cancellation of registration for associations that disrupt operations or cause losses to other franchise owners.
The inability of the headquarters to identify members of an owners' association that requests consultations is also cited as a problem with the revision. In this case, there are concerns about the negative effects of anonymity, so the industry asserts that rights should be established to allow for the review of membership lists when an owners' association requests consultations.
An official from the Korean Franchise Industry Association said, "We are actively communicating with the National Assembly to ensure some clauses of the revision can be improved."