BBQ fined 300M won for fowl play

BBQ, a chain of popular fried chicken restaurants, was fined 300 million won ($280,000) by the Fair Trade Commission on Tuesday for forcing franchisees to renovate their stores and cover the cost.

On top of the fine, BBQ will have to reimburse store owners 532 million won for the renovations and correct the practice.

According to the antitrust agency, 75 store owners renovated their restaurants under orders from BBQ headquarters between March 2015 and May last year. The total cost amounted to 1.81 billion won, out of which 532 million won should have been covered by headquarters.

Thirty-five store owners will be reimbursed 40 percent of what they spent on renovations. The other 40 people will recoup 20 percent of their expenses.

The Fair Trade Commission said BBQ violated the franchise business law, which stipulates that a company must cover 20 percent of construction costs when it requires a franchisee to renovate. That portion goes up to 40 percent when a store is either expanded or relocates. The regulation was created to prevent headquarters from demanding interior design changes when they are not necessary.

The Fair Trade Commission said BBQ systematically pressured owners to renovate their stores and encouraged employees at headquarters to press for changes. It was even one of the criteria in year-end evaluations.

Representatives from BBQ used tactics like telling franchisees that their contract could only be extended when they improve their store. Owners who agreed said they had to sign a contract stating that renovating their store was their own voluntary decision and not a demand from headquarters.

BBQ was founded in 1995 and is now Korea’s third-largest chicken franchise with 1,490 restaurants across the country.

In Korea, it has become common practice for franchising companies to require franchisees to renovate their stores frequently. Many of them have discreet agreements with specific contractors and request stores use those contractors which typically charge a higher price.

“We will closely investigate cases where franchises have demanded renovations without paying the burden they are required to pay,” said Kim Dae-young, head of the Fair Trade Commission’s franchise division.

BY LEE HO-JEONG [lee.hojeong@joongang.co.kr]