Coffee chains face probe for bullying franchisees

Korea's corporate watchdog is set to begin a large-scale probe of coffee shop franchises to determine whether franchisees are being treated unfairly.

Sources within the Fair Trade Commission said that the antitrust agency will begin investigating coffeehouse franchises in April.

"There have already been repeated reports of unfair practices by some franchises in the coffeehouse market", an FTC official told Yonhap yesterday. "We plan to conduct a massive investigation as a fundamental way of helping to guarantee franchisees' livelihoods".

Although the FTC has not officially selected who it will investigate, domestic coffeehouse franchises including Caffe Bene, Holly's, Angel-in-Us, Ediya and Tom & Tom's are likely to be the subjects, while foreign brands that are directly managed, like Starbucks and The Coffee Bean & Tea Leaf, will be off the list.

Cases of unfair treatment against franchisees in other food and dining sectors have already been well-documented in Korea. In the past, franchise companies have been found to strong-arm franchisees to pay for unnecessary interior renovations. In other cases, they have crippled a franchisee's business by allowing a new shop to open in the same area.

After analyzing reports of such practices, the FTC is slated to select those companies that have amassed a number of black marks for review. Those found to have engaged in unfair practices will likely be penalized.

FTC Chairman Kim Dong-soo has taken pains lately to highlight the injustices in franchise businesses, signaling the latest probe.

"In order to create a corporate ecosystem that coexists and grows, fair trade practices must be established in franchises", he said on Jan. 1.

By Lee Jung-yoon