Franchisees dispute new regulations

The Korea Franchise Association released a statement yesterday saying it might suit the National Commission for Corporate Partnership if it doesn’t remove bakeries and food franchises from a list of businesses reserved for small owners.

The association argued that restrictions, meant to protect mom-and-pop shops from competition by big companies, are illegal.

On Tuesday, the National Commission for Corporate Partnership designated 14 service industries, including bakeries and restaurants, and two manufacturing businesses - plastic bags and buckwheat flour - as areas reserved for small enterprises.

Under the plan, bakery franchises like SPC Group’s Paris Baguette and CJ’s Tous Les Jours, won’t be able to open stores within 500 meters (1,640 feet) of existing mom-and-pop bakeries. On top of that, their growth will be limited to 2 percent of the total number of stores they operated last year.

Since such franchise bakeries are run by individuals with their own capital, they shouldn’t be subject to such prohibition against conglomerates, the association said.

It said owners of franchise stores are small merchants or self-employed people and that restriction by the government undermine fair competition and could be seen as an act of collusion in violation of the country’s fair trade law.

“We will even file a lawsuit against the commission, and will seek countermeasures by setting up an emergency committee,” said Cho Dong-min, chairman of the association.

Meanwhile, the Korea Franchise Association agreed to a launch of new association next month representing local retailers of all sizes in a meeting organized by the Ministry of Knowledge Economy yesterday.

The association will focus on presenting a long-term master plan for the industry.

Although the launch of such an association had been discussed among large retailers including E-Mart, Lotte Mart and Homeplus and heads of small retailers or associations that represent vendors at traditional markets, groups representing franchises, convenience stores and online shopping outlets have now joined the discussion.

“Because there are more regulations from the government, our participation in a discussion to launch a new association will help local franchises be more competitive in the market,” said Ham Jeong-hoon, a director of the Korea Franchise Association’s policy division.

Government officials think a road map is needed for the local retail industry to avoid clashes between large and small retailers.

“We think the lack of a long-term goal or vision presented by the government or the industry has caused conflicts between large and small entities,” said Park Young-sam, manager of the Ministry of Knowledge Economy’s retail division.

“Instead of forcing retailers to work for shared growth with one another, the new association will encourage voluntary actions by large retailers in a bid to make the overall retail market larger.”

By Song Su-hyun, Lee Sun-min [ssh@joongang.co.kr]