Photo courtesy of Yonhap News

 

[Alpha Biz= Kim Minyoung] South Korea’s antitrust regulator has imposed corrective measures and a fine on Sinjeon Foodsys, the operator of the Sinjeon Tteokbokki franchise, for unfairly forcing franchisees to purchase packaging and related supplies.

The Fair Trade Commission (FTC) said on March 22 that it has decided to issue a corrective order and impose a fine of 967 million won (approximately $720,000) on the company for violating the Franchise Business Act. The decision was made at a subcommittee meeting chaired by Commissioner Kim Jung-ki.

According to the FTC, Sinjeon Foodsys compelled franchisees to purchase 15 categories of items—including chopsticks, spoons, paper cups, packaging containers, and plastic bags—worth a total of 6.46 billion won between March 2021 and December 2023.

The company supplied these items to franchisees with profit margins ranging from 12.5% to 34.7%, generating at least 630 million won in unfair gains through the practice, the regulator estimated.

Under the Franchise Business Act, a franchisor may require franchisees to purchase specific items from designated suppliers only if such items are deemed essential to protecting trademark rights, and this requirement must be disclosed in advance in the franchise disclosure document.

However, the FTC found that the packaging materials in question were not directly related to the taste or quality of core menu items such as tteokbokki or fried foods, and did not significantly differ from products available on the market.

Despite not designating these items as mandatory in its disclosure document, Sinjeon Foodsys reportedly pressured franchisees by sending formal notices stating that sourcing supplies elsewhere would constitute a serious breach of contract and could lead to claims for damages.

According to its disclosure filing, Sinjeon Tteokbokki operated 671 franchise outlets nationwide as of 2024.

 

 

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