WHAT IS FRANCHISE INDUSTRY IN THE REPUBLIC OF KOREA?

Franchise refers to the business transaction of affiliates. Franchise means a transactional relationship where a franchisor provides franchisees with certain support and training in order to sell its products and services more effectively, and receives franchise deposits in return.
Through this relationship, the franchisor can resolve the issue of insufficient funds and labor while the franchisees can get the franchisor’s brand image and management know-hows. Therefore, both will be able to grow together. Consequently, franchise is a high-tech marketing with which one is able to operate a business with only a small capital, not a large capital investment.
In the ROK, the first franchise, LIM’S CHICKEN, was launched in 1975, followed by LOTTERIA in 1979. Since then, global franchise companies have been established rapidly in the ROK. KFC in 1984 and McDonald's in 1988 are such examples. In 2002, however, the government enacted the “Fair Franchise Practices Act" and introduced regulations on affiliated businesses as small and big problems started to arise.

Under the Fair Franchise Practices Act (abbreviated as Franchise Business Act), which is operated by the Korea Fair Trade Commission, the franchise business is defined as follows.
Franchise refers to continuing business relationships where a franchisor in the ROK allows the franchisees to sell the franchisor’s products (including raw materials and sub-materials) or services in accordance with a certain quality standard or method of operation, using the franchisor’s trademarks, service marks, trade names, and signboard, and supports the franchisees’ management, sales activities, education and control whereas the franchisees pay franchise deposits to the franchisor in return for the franchisor’s support and training regarding the use of sales signs, management and sales activities. (Article 2 (1) of the Fair Franchise Practices Act)
Since the start of 2000s, the franchise business has been booming in the ROK. Dessert business has begun to explode on the basis of creative and novel ideas around 2010. In recent years, it has been gradually expanding to the global market. According to an industry survey in 2016, South Korean food companies have advanced to more than 50 countries. In China, for example, there are more than 2,942 shops from 140 South Korean companies. South Korean franchises are active overseas mainly because of excessive domestic competition among similar industries, high rents and high labor costs.

To learn more about the franchise industry under the YOA project, please visit our official site! :)

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