The Fair Trade Commission announced on May 31 that it has imposed a corrective order and a fine of 210 million won on Gwi Han Sarang Deul for not reporting profits received from suppliers in its information disclosure statement while exaggerating the number of franchise stores. Gwi Han Sarang Deul operates the Gwi Han Jokbal franchise.
According to the commission's investigation, Gwi Han Sarang Deul received 141,145,000 won from suppliers for facilitating transactions with franchisees in 2020 but did not include this amount in its disclosure statement. Additionally, in 2021, the company received 174,856,000 won from a sauce supplier but only reported 87,131,000 won in its disclosure statement.
The commission views the economic benefits received by the franchise headquarters from suppliers as crucial information that could lead to price increases for franchisees. Therefore, the failure to disclose or downplay this information was deemed a deceptive practice, resulting in the corrective order and the fine of 210 million won.
The investigation also uncovered false and exaggerated advertising practices by Gwi Han Sarang Deul. From April to July 2022, the company advertised on its franchise consultation website that it had opened 16 new stores in May and June.
However, the commission found that only one store, the Yeoksam branch, was actually opened during that period. Of the remaining 15 stores, seven were opened at different times, and eight had not opened by December 2023.
The commission considers the number of stores opened within a specific timeframe as a key indicator of the franchise's success. Consequently, it classified this behavior as false and exaggerated advertising and issued a corrective order.
A commission official stated, "We will continue to monitor and take strict action against violations of information disclosure obligations and unfair advertising practices to ensure that prospective franchisees and franchise owners can engage in fair transactions with franchise headquarters on equal footing."
* This article has been translated by AI.
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