Paris Baguette breaks bread with owners on labor costs

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Paris Baguette breaks bread with owners on labor costs

Paris Baguette, Korea’s largest bakery chain, has worked out an agreement with its franchisees to share the cost of higher wages after the government raised the minimum wage by a record 16.4 percent at the beginning of the year, the company said Thursday.

The bakery chain has reduced the number of ingredients and equipment that franchisees are obligated to purchase by 13 percent. The practice, considered pervasive in the franchise industry, entered the spotlight last year after some companies were found to have forced franchisees to purchase materials at above market prices.

Paris Baguette said it went over the entire list of materials with franchisees and removed items that could be purchased at a lower cost from outside suppliers. They include ingredients like sugar and salt and equipment such as refrigerators, baking trays and butter paper. The amount that franchisees have to pay for ready-made bread was reduced by 5 to 7 percent.

For items that remain on the list, Paris Baguette said it would hold frequent meetings with franchisees to discuss lowering their prices closer to the market value.

Paris Baguette said that the agreement was intended to “share the hardship with franchisees, which face an inevitable fall in sales from the minimum wage hike and slow economy.”

On Jan. 1, the minimum wage rose to 7,530 won ($7.07), and several other franchise companies, including Paik’s Coffee and Teacher Kim, a gimbap (Korean rice roll) chain, have made similar pledges to share the cost with franchisees, either by lowering licensing fees or reducing materials prices.

Convenience stores CU, 7-Eleven, GS25 and Ministop recently came up with plans to offer financial support to their franchisees, since many of them pay their staff the minimum wage.

The companies’ efforts reflect the policy direction of Fair Trade Commission Chairman Kim Sang-jo, who has emphasized that franchisors pursue “mutual growth” with their franchisees. After he took over the commission last year, the government regulator began investigating several companies for mistreating their staff and franchise owners.

Paris Baguette was one of them. The bakery chain was criticized for mistreating its workers and using a hiring scheme that the government deemed illegal.

In December, the Ministry of Employment and Labor fined Paris Baguette 16.2 billion won for the hiring scheme, but it avoided the penalty this month after reaching an agreement with its labor union.

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