Gyeonggi Province to Expand Support Projects for Shop Owner Groups

[Suwon Ilbo=Reporter Park No-hun] Gyeonggi Province announced the results of its pilot project on the 6th regarding a "Shop Owner Group Support Project," which is one of the initiatives of the Fair Economy Committee, aimed at supporting small business owners operating franchises and dealerships by forming groups to negotiate with headquarters.

Based on the pilot project results, the province decided to expand the shop owner group support project further.

In South Korea's franchise sector, only about 50 brand-specific associations are organized, and there are virtually no organizations in the dealership and subcontracting sectors.

The province explained that this project is significant in helping small business associations strengthen their bargaining power and advocate for themselves on equal footing with brand headquarters, large distribution channels, and shop owners.

In early this year, the province identified the industry situation through expert consultations and selected 2 organizations that needed legal support in cases of unfair treatment by headquarters or in negotiations over business conditions, implementing a pilot project from July.

The first case is the "Cuckoo Shop Owner Council," formed by service center owners of the domestic renowned rice cooker brand "Cuckoo."

Cuckoo has continued to face issues including unrealistically low agency fees and parts margin rates for free repairs, forced introduction of new home care services (regular management services) imposing additional burdens on shop owners, a three-strikes-you're-out system where three F ratings automatically terminate contracts, and the unstable position of shop owners who must renegotiate contracts annually without automatic renewal.

Accordingly, the province provided legal consultation on unfair damages experienced by shop owners following the formation of the Cuckoo Shop Owner Council, while also providing operational consultation including fair trade education to strengthen collective bargaining power.

The second case is the Subway sandwich shop owner group.

The Subway sandwich shop owner group decided to reorganize issues and reapply at the group level regarding a case in which a franchise shop owner filed an unfair trade complaint with the Fair Trade Commission in 2018 over a closure dispute with headquarters, but an investigation has yet to begin.

For foreign franchises, most are subject to domestic laws such as the Franchise Business Act and the Standard Terms and Conditions Act when conducting domestic business; however, cases often lack essential contract renewal clauses in franchise agreements, and the need for improvement has been raised.

Meanwhile, the province plans to continuously monitor unfair trade issues revealed during this support project and prepare follow-up support measures including on-site opinion surveys through visits to shop owner dispute sites.

Additionally, from next year, the province will expand support areas including education necessary for group organization, legal review, operational and documentation consultation, collective purchasing of material resources, and will also push for recommendations to amend central government laws for related legal system improvement.

Kim Ji-ye, head of the Fair Economy Division of Gyeonggi Province, said "If local government supports small business owners in enhancing their self-sufficiency, we believe it will have a significant preventive effect against unfair practices between headquarters and shop owners," and added "We will make active efforts to reduce unnecessary social conflicts and costs through rational communication channels and to promote communication and cooperative coexistence."