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The disclosure cycle for the number of franchise and company-owned stores by brand will be shortened from once a year to once a quarter to help prospective founders make informed decisions.
The Korea Fair Trade Commission (KFTC) announced that the revision to the Enforcement Decree of the Franchise Business Act containing these measures passed the Cabinet meeting today (the 28th).
The core of the revised enforcement decree is reorganizing the items listed in the information disclosure document and shortening the update cycle for critical items from once a year to once a quarter.
The information disclosure document contains data related to franchise operations, such as the franchisor's sales related to the franchise business, the franchise business experience of specially related persons, and the cost burden of franchise business operators before and after opening.
Accordingly, the information disclosure document will now include items such as information on the likelihood of long-term franchise survival, information on average business penalties in the event of mid-term contract termination, information on the franchisor's overseas expansion, and information on franchisors owned by private equity funds (PEFs).
Items such as the details of the franchisor's mergers and acquisitions, franchise fee deposit procedures, and the calculation criteria for the annual average sales of company-owned stores were deleted as they were deemed redundant or irrelevant to startup decision-making among existing disclosure items.
In addition, changes in the number of franchise and company-owned stores, which are crucial for prospective founders in selecting a brand, will be disclosed once a quarter.
The revised enforcement decree also raised the maximum surcharge limit from 50% to 100% for franchisors that repeatedly violate the law.
Furthermore, while implementing the mandatory company-owned store operation (1+1) system—which requires a franchisor to operate at least one company-owned store for one year before registering a new information disclosure document—the KFTC now requires franchisors to submit documentary evidence of company-owned store operations upon new registration to verify compliance.
A legal basis was also established to utilize electronic documents when disclosure registration agencies issue notices regarding registration refusals, pending disclosures, and registration cancellations.
Along with this, procedures were established for franchisors seeking to directly cancel their information disclosure registration due to reasons such as business closure.
The revised enforcement decree will take effect on January 1, 2028, along with the revision to the Notice on Standard Forms for Franchise Business Information Disclosure Documents, which will be promulgated on August 4th.
Alongside the amendment of the enforcement decree, the KFTC also revised the Notice on Standard Forms for Franchise Business Information Disclosure Documents.
According to the revised notice, the table of contents for the information disclosure document will be reorganized in chronological order of the franchise lifecycle, covering opening, operation, and termination.
A summary containing core information that influences startup decision-making, such as the number of franchises by region and annual average sales, will also be added.
(Photo provided by the Korea Fair Trade Commission, Yonhap News)
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