A Burger King franchise headquarters, BKR, has been sanctioned by the Fair Trade Commission for forcing franchisees to purchase cleaning agents and tomatoes from themselves or specific companies only. Although designated as “recommended items” that franchisees could purchase autonomously, BKR allegedly checked the use of certain hard-to-purchase products, penalizing those who didn’t comply, effectively forcing franchisees to buy from them.
The Fair Trade Commission announced on the 13th that they have imposed a corrective order along with a fine of 300 million won on BKR for violating franchise business laws. According to the commission, since 2013, BKR had listed 15 types of cleaning agents and 16 types of tomatoes in their disclosure as “recommended” items that franchisees were free to purchase in the market according to BKR’s specifications.
However, in reality, they designated specific American brand cleaning agents and tomatoes produced by approved domestic companies, which were difficult to buy in the market, for internal purchasing through their system. During franchise inspections, compliance with these product specifications was checked, and non-compliance resulted in deductions from franchisee evaluation scores.
Franchisees with evaluation scores below a certain level during inspections received warning notices and faced disadvantages such as suspension of delivery operations or business closures. In the case of tomatoes, using unauthorized products resulted in a zero evaluation score regardless of other factors, potentially leading to store closures or contract termination.
Due to this, franchisees had to use BKR-designated products to avoid penalties. Especially since BKR-designated cleaning agents were not easily available in the market, franchisees were essentially forced to purchase from the headquarters. The Fair Trade Commission found that these cleaning agents were not directly related to the taste or quality of Burger King’s core product, the hamburger, nor were they essential for maintaining a unified brand image, thus questioning the necessity of purchasing them from headquarters.
Furthermore, the fact that using authorized cleaning agents and tomatoes was inspected and could result in penalties impacted critical contractual information, which BKR failed to disclose. A Fair Trade Commission representative stated that this action aimed to lower the burden on franchisees by allowing them to purchase domestic products with equivalent performance instead of designated brand products. It is expected to contribute to the establishment of transparent and fair franchise contract practices by requiring precise information about product usage inspections and associated penalties, which influence franchisee business decisions.