Act No. 6704, May 13, 2002 Amended by Act No. 7109, Jan. 20, 2004 Act No. 7315, Dec. 31, 2004 Act No. 7796, Jan. 29, 2005 Act No. 8630, Aug. 3, 2007 Act No. 10168, Mar. 22, 2010 Act No. 12094, Aug. 13, 2013 Act No. 14135, Mar. 29, 2016 CHAPTER I GENERAL PROVISIONS The purpose of this Act is to contribute to the promotion of the welfare of consumers and the sound growth of the national economy by establishing a fair trading order for franchise business and by ensuring the mutually complementary and balanced growth of franchisers and franchisees on an equal footing. The terms used in this Act shall be defined as
follows: <Amended by Act No. 8630, Aug. 3, 2007; Act No. 12094, Aug. 13, 2013>
Article 3 (Exclusion from Application)
CHAPTER II BASIC PRINCIPLES FOR FRANCHISE BUSINESS TRANSACTIONS Article 4 (Principle of Good Faith) Parties to franchise business shall carry out their respective duties in good faith in engaging in franchise business. Article 5 (Obligations of Franchisers) Each franchiser shall observe the following obligations:
Article 6 (Obligations of Franchisees) Each franchisee shall observe the following obligations:
CHAPTER III FAIR TRANSACTIONS IN FRANCHISE BUSINESS Article 6-2 (Registration, etc. of Information Disclosure Statements)
[This Article Newly Inserted by Act No. 8630, Aug. 3, 2007] Article 6-3 (Refusal of Registration of Information Disclosure Statements)
[This Article Newly Inserted by Act No. 8630, Aug. 3, 2007] Article 6-4 (Cancellation of Registration of Information Disclosure Statements)
[This Article Newly Inserted by Act No. 8630, Aug. 3, 2007] Article 6-5 (Deposit, etc. of Franchise Fees)
[This Article Newly Inserted by Act No. 8630, Aug. 3, 2007] Article 7 (Duty to Provide Information Disclosure Statements)
Article 8 Deleted. <by Act No. 8630, Aug. 3, 2007> Article 9 (Prohibition on Providing False or Exaggerated Information, etc.)
Article 10 (Return of Franchise Fees)
Article 11 (Matters to be Entered, etc. in Franchise Agreement)
Article 12 (Prohibition on Unfair Transactions)
Article 12-2 (Prohibition of Unfair Pressure to Improve Store Environment, etc.)
[This Article Newly Inserted by Act No. 12094, Aug. 13, 2013] Article 12-3 (Prohibition of Unfair Restrictions on Business Hours)
[This Article Newly Inserted by Act No. 12094, Aug. 13, 2013] Article 12-4 (Prohibition of Unfair Violation of Sales Areas)
[This Article Newly Inserted by Act No. 12094, Aug. 13, 2013] Article 12-5 (Recommendation of Basis for Transactions for Each Type of Business) Where necessary for the establishment of fair trade order in franchising, the Fair Trade Commission may establish the basis for desirable transactions for each type of business and recommend franchisers to comply with such basis. [This Article Newly Inserted by Act No. 12094, Aug. 13, 2013] Article 12-6 (Notification, etc. of Execution Details of Advertising and Promotional Events)
[This Article Newly Inserted by Act No. 14135, Mar. 29, 2016] Article 13 (Renewal, etc. of Franchise Agreement)
[This Article Wholly Amended by Act No. 8630, Aug. 3, 2007] Article 14 (Limitations on Termination of Franchise Agreement)
Article 14-2 (Consultation, etc. on Alteration of Conditions of Trade of Franchisees Association)
[This Article Newly Inserted by Act No. 12094, Aug. 13, 2013] Article 15 (Voluntary Regulations)
Article 15-2 (Damage Compensation Insurance for Franchisees)
[This Article Newly Inserted by Act No. 8630, Aug. 3, 2007] Article 15-3 (Establishment of Mutual Aid Association)
[This Article Newly Inserted by Act No. 8630, Aug. 3, 2007] Article 15-4 (Encouragement, etc. of Conclusion of Agreement between Franchisers and Franchisees)
[This Article Newly Inserted by Act No. 12094, Aug. 13, 2013] CHAPTER IV MEDIATION, ETC. OF DISPUTES Article 16 (Establishment of Franchise Business Transaction Dispute Mediation Council) There is established in the Korea Fair Trade Mediation Agency under Article 48-2 (1) of the Monopoly Regulation and Fair Trade Act (hereinafter referred to as "KOFAIR") a Franchise Business Transaction Dispute Mediation Council (hereinafter referred to as the "Council") in order to mediate disputes on franchise business. [This Article Wholly Amended by Act No. 8630, Aug. 3, 2007]
Article 17 (Composition of Council)
Article 18 (Restriction on Commissioning Members Representing Public Interest)
Article 19 (Meetings of Council)
Article 20 (Exclusion, Challenge, or Avoidance of Members)
Article 21 (Matters Subject to Mediation of Council) The Council shall mediate disputes arising from franchise business transactions at the request of the Fair Trade Commission or a disputing party. Article 22 (Application for Mediation, etc.)
Article 23 (Mediation, etc.)
Article 24 (Preparation and Effects of Mediation Protocols)
Article 25 (Provisions Governing Organization of Council, etc.) Necessary matters concerning the organization and operation of the Council and mediation procedures shall be prescribed by Presidential Decree in addition to the provisions of Articles 16 through 24. Article 26 Deleted. <by Act No. 8630, Aug. 3, 2007> Article 27 (Franchise Traders)
Article 28 (Business of Franchise Traders) Each franchise trader shall undertake the following duties: <Amended by Act No. 12094, Aug. 13, 2013>
[This Article Newly Inserted by Act No. 8630, Aug. 3, 2007] Article 29 (Registration of Franchise Traders)
Article 30 (Responsibilities of Franchise Traders)
Article 31 (Cancellation of Registration of Franchise Traders and Suspension of Qualification)
Article 31-2 (Education, etc. on Franchise Business Transactions)
[This Article Newly Inserted by Act No. 8630, Aug. 3, 2007] CHAPTER V THE KOREA FAIR TRADE COMMISSION INVESTIGATION AND ENFORCEMENT PROCEDURE, ETC. Article 32 (Restriction on Activities subject to Investigation) Franchise business transactions subject to investigation by the Fair Trade Commission pursuant to this Act shall be limited to those for which three years have not passed since such transactions were closed: Provided, That the foregoing shall not apply to franchise business transactions reported within three years after the transactions were closed. Article 32-2 (Written Fact-finding Surveys)
[This Article Newly Inserted by Act No. 12094, Aug. 13, 2013] Article 33 (Corrective Measures)
Article 34 (Recommendation for Correction)
Article 35 (Penalty Surcharges)
[This Article Wholly Amended by Act No. 12094, Aug. 13, 2013] Article 36 (Cooperation of Heads of Relevant Administrative Agencies) If the Fair Trade Commission deems it necessary to enforce this Act, it may seek opinions from the heads of relevant administrative agencies or request them to assign their employees to conduct investigations or provide other necessary cooperation. Article 37 (Application Mutatis Mutandis of the Monopoly Regulation and Fair Trade Act)
Article 38 (Relationship to the Monopoly Regulation and Fair Trade Act) Article 23 (1) 1 (limited to unfair refusal to make transactions), 3 (limited to the unfair induction of customers of competitors to trade with oneself), 4, and 5 (limited to making of transactions on condition of placing unfair restraints on business activities of a certain transacting partner) and Article 29 (1) of the Monopoly Regulation and Fair Trade Act shall not apply to matters governed by this Act in relation to franchise business transactions. <Amended by Act No. 8630, Aug. 3, 2007> Article 39 (Delegation and Entrustment of Authority)
The Fair Trade Commission may require a person delegated or entrusted with administrative affairs pursuant to Article 39 to make reports as necessary. CHAPTER VI PENALTY PROVISIONS Article 41 (Penal Provisions)
Article 42 (Joint Penal Provisions) When a representative of a corporation, or an agent, employee or other worker of a corporation or private individual commits the offensive acts in Article 41 in connection with a business of the corporation or private individual, not only shall the offender be punished, but also the corporation or private individual shall be punished by a fine as prescribed in the relevant Article: Provided, That the same shall not apply to cases where the corporation or private individual paid considerable attention or diligently supervised the concerned business to prevent such offensive acts. [This Article Wholly Amended by Act No. 10168, Mar. 22, 2010] Article 43 (Fines for Negligence)
Article 44 (Criminal Charge)
ADDENDA
ADDENDUM <Act No. 7109, Jan. 20, 2004> This Act shall enter into force on the date of its promulgation. ADENDA <Act No. 7315, Dec. 31, 2004> Article 1 (Enforcement Date) This Act shall enter into force on April 1, 2005. (Proviso Omitted.) Articles 2 through 10 Omitted. ADDENDA <Act No. 7796, Dec. 29, 2005> Article 1 (Enforcement Date) This Act shall enter into force on July 1, 2006. Articles 2 through 6 Omitted. ADDENDA <Act No. 8630, Aug. 3, 2007> Article 1 (Enforcement Date) This Act shall enter into force six months after the date of its promulgation: Provided, That the amended provisions of Article 37 (2) shall enter into force three months after the date of its promulgation, and the amended provisions of Articles 6-5, 15-2, and 15-3 one year after the date of its promulgation. Article 2 (Applicability to Franchise Fees) The amended provisions of subparagraph 6 of Article 2 shall be applicable to franchise fees payable after this Act enters into force. Article 3 (Applicability to Prohibition of Unfair Trade) The amended provisions of subparagraph 4 of Article 12 shall be applicable to franchise agreements executed or renewed on or after the entry into force of this Act. Article 4 (Applicability to Renewal of Franchise Agreements) The amended provisions of Article 13 shall be applicable to franchise agreements executed or renewed on or after the entry into force of this Act. Article 5 (Applicability to Limitations on Termination of Franchise Agreements) The amended provisions of the main sentence of Article 14 (1) shall be applicable to cases where an agrement is terminated due to a breach of the agreement on or after the entry into force of this Act. Article 6 (Special Cases for Information Disclosure Statements) Notwithstanding the amended provisions of Article 6-2 and 7 (1) and (2), franchisers may provide pre-existing information disclosure statements for six months from the entry into force of this Act. Article 7 (Transitional Measures concerning Notice of Termination of Franchise Agreements, etc.) A notice of termination of a franchise agreement executed or renewed before this Act enters into force shall be governed by the former provisions. Article 8 (Transitional Measures concerning Return of Franchise Fees) The return of franchise fees shall be governed by the former provisions, if a franchiser provided false or exaggerated information in violation of former Article 9 (1), omitted a material fact under former Article 8 (2), or unilaterally suspended franchise business without a justifiable ground, before this Act enters into force. In such cases, the extent of the return of franchise fees paid before this Act enters into force shall be governed by former subparagraph 6 of Article 2 and Article 10. Article 9 (Transitional Measures concerning Council)
Article 10 (Transitional Measures concerning Franchise Business Counsellors)
Article 11 (Transitional Measures concerning Penal Provisions and Fines for Negligence) The application of penal provisions to, and the imposition of fines for negligence upon, an act committed before this Act enters into force shall be governed by the former provisions. ADDENDUM <Act No. 10168, Mar. 22, 2010> This Act shall enter into force on the date of its promulgation. ADDENDUM <Act No. 11323, Feb. 17, 2012> This Act shall enter into force three months after the date of its promulgation. ADDENDA <Act No. 12094, Aug. 13, 2013> Article 1 (Enforcement Date) This Act shall enter into force six months after the date of its promulgation: Provided, That the amended provisions of Article 12-4 shall enter into force one year after the date of its promulgation. Article 2 (Transitional Measures concerning Registration of Information Disclosure Statements) An information disclosure statement registered before this Act enters into force shall be deemed registered pursuant to the amended provisions of subparagraph 10 of Article 2 and Article 6-2 (1): Provided, That where a franchisor registers the first alteration after this Act enters into force, it shall register the alteration including matters added pursuant to the amended provision of subparagraph 10 of Article 2. Article 3 (Transitional Measures concerning Establishment of Sales Areas) Where matters concerning the establishment of the sales area are included in a franchise agreement pursuant to Article 11 (2) 5 before this Act enters into force, the former provisions shall apply thereto notwithstanding the amended provisions of Article 12-4 (1): Provided, That where a franchisor renews the first franchise agreement after this Act enters into force, it shall establish the sales area under the amended provisions of Article 12-4 (1) and mention such sales area in the franchise agreement. ADDENDA <Act No. 14135, Mar. 29, 2016> Article 1 (Enforcement Date) This Act shall enter into force six months after the date of its promulgation. Article 2 (Applicability to Change of Sales Area) The amended provisions of Article 12-4 (2) shall apply beginning with the first franchise agreement renewed after this Act enters into force. Article 3 (Applicability to Notification, etc. of Execution Details regarding Advertising or Promotional Events) The amended provisions of Article 12-6 (1) shall apply beginning with the first franchise advertising or promotional event held after this Act enters into force. Article 4 (Applicability to Effect of Mediation or Mediation Protocol) The amended provisions of Articles 23 and 24 shall apply beginning with the first dispute mediation applied for or requested after this Act enters into force. Article 5 (Applicability to Compensation) The amended provisions of Article 37 (3) shall apply beginning with the first compensation lawsuit filed after this Act enters into force. What is the name given to the share of profits paid by a franchisee to a franchisor?A royalty payment or royalty fee is a fee the franchisee must pay to the franchisor. This fee is usually calculated based on a percentage of the franchisee's yearly sales and profit.
What is franchisor distribution?A distribution franchise is a contract in which a franchisor gives the franchisee the right to distribute or sell a specific product on its behalf. Under this arrangement, the franchisee becomes the exclusive or semi-exclusive distributor of the franchisor's product.
Does the franchisor pay the franchisee to set up in business?In exchange for acquiring a franchise, the franchisee usually pays the franchisor an initial start-up fee and annual licensing fees.
Is the franchisor is the buyer?A franchise is a business structure where the buyer (the franchisee) pays a licensing fee to trade using the branding, trademarks, products, suppliers and systems of an established business (the franchisor).
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