SEOUL, Nov. 28 (Korea Bizwire) – Seoul announced on November 27 that it had teamed up with franchisee associations to draw up a blueprint for a nine-member arbitration tribunal whose primary task will be to mediate disputes between franchisees and franchisors.
Abuses of power by franchisors – “gapjil” in Korean – are a common complaint among franchisees. For the whole month of August, Seoul encouraged franchisees to report cases of gapjil suffered as part of its fact-finding study and registered 113 incidents.
Last year, the metropolitan government carried out an in-depth investigation into 49 franchisors and 1,328 franchise locations, after which the city asked the Fair Trade Commission to conduct its own investigation into companies suspected of unfair business practices.
Typically, such disputes made their way to the courts, but by setting up the planned tribunal, all parties involved hope that the majority of cases can be resolved in a quick and efficient manner.
A city official said, “The majority of the cases registered were judged to be problems that can be sufficiently resolved through mediation. What franchisees want more than anything is for their problems to be handled quickly and to feel assured as they carry out their livelihood, which means that simple mediation is sometimes more suitable than complicated and time-consuming legal remedies.”
The tribunal’s seats will be filled by individuals representing the interests of the public, the franchisors and the franchisees.
Some of the diverse topics that this group will seek to resolve are unfair contract termination, withholding of crucial information, renovation demands made to franchisees without proper cause and other issues that may arise.
In Seoul, franchisees will first lodge a complaint and request for arbitration with the city, upon which the relevant authorities will initiate an investigation into the claims. Once the investigation is complete, the city will turn over its findings to the tribunal, which will deliberate and hand down a ruling.
However, if the franchisee either rejects the tribunal’s ruling or files a lawsuit during or after the tribunal makes its final decision, the case will have to be resolved in court.
Seoul is hoping to have the tribunal up and running by January 2018.
The existence of gapjil and toxic working relationships between franchisors and franchisees are issues South Koreans are well aware of. Recently, a spat between a BBQ Chicken franchise owner and the CEO of the brand became headline news after media outlets reported that CEO Yoon Hong-geun had tried to barge into the restaurant’s kitchen and ordered the staff present to “close down the location”.