Draft Amendment for Mandatory Item Transaction Conditions Negotiation Notice, Fair Trade Commission Logo,
“From next month, if franchise headquarters want to change the transaction conditions unfavorably for franchisees, such as raising prices of essential items, they must negotiate with the franchisees.”
“The Fair Trade Commission announced the draft of the ‘Notice on Negotiation of Changes in Transaction Conditions for Mandatory Purchase Items’ on the 28th, which includes matters related to negotiations on changes in transaction conditions for essential items between franchise headquarters and owners. This draft clarifies the meaning of the amended provisions of the Franchise Business Act Enforcement Decree, which will take effect from December 5th.”
The draft enumerates cases where changing transaction conditions unfavorably requires negotiation, such as adding essential items or increasing the supply price per unit of essential items. Essential items are products that the headquarters mandates to be purchased from designated suppliers to maintain brand consistency, also known as mandatory purchase items.
The procedure for negotiating changes in transaction conditions has also been detailed. Franchise headquarters must notify franchisees with specific details and negotiation methods before starting negotiations, giving sufficient time. Negotiations can be conducted face-to-face or remotely, but franchisees must be able to express their opinions easily and freely. During negotiations, if franchisees request information or verification, the headquarters must comply, and after negotiations, the results must be compiled and communicated to all franchisees.
The draft also outlines instances that do not constitute proper negotiation, such as giving short notice of the date and location of a briefing or forcing or inducing specific choices during negotiations.
A Fair Trade Commission official stated, “To prevent legal disputes from arising due to franchise headquarters not fully understanding the contents of the draft, a guidance period will be operated until January 31st next year.”