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Photo courtesy of the Korea Fair Trade Commission |
[Alpha Biz= Paul Lee] SPC BR Korea, the franchising division of ice cream brand Baskin-Robbins, has effectively been cleared of allegations that it unfairly shifted interior renovation costs to franchisees.
According to government sources on July 24, the Korea Fair Trade Commission (KFTC) held a subcommittee meeting in April and decided to conclude its review of SPC BR Korea’s suspected violations of the Fair Transactions in Franchise Business Act.
While not a formal ruling of innocence, the KFTC’s decision to terminate deliberations without a violation ruling is functionally equivalent to a no-action outcome from the perspective of the company. This type of decision is rendered when the commission determines that the evidence presented by case examiners (akin to prosecutors) is insufficient to establish a legal violation.
The KFTC had been reviewing whether BR Korea failed to cover its legally mandated share of renovation costs during franchise store upgrades between 2015 and 2022. Under franchise law, franchisors are required to pay 20% to 40% of remodeling costs when upgrades are initiated by the franchisor.
The core issue was whether BR Korea had directly recommended or demanded the renovations. KFTC examiners argued that BR Korea had developed renovation plans and led the process, thus triggering cost-sharing obligations.
However, BR Korea countered that the renovations in question were part of store transfers involving third-party ownership changes—not standard upgrades for existing franchisees. The company argued these should be treated like new store openings, which are exempt from mandatory cost-sharing obligations.
The KFTC commissioners concluded that it was difficult to definitively determine whether the law had been violated, especially due to the lack of clear regulatory standards for renovation cases involving third-party franchise transfers.
"The law does not clearly state whether the cost-sharing obligations apply to transferee franchisees who are granted new contract terms, rather than simply inheriting existing ones," said the commission. "Further review is needed in light of general industry practices beyond just this specific case."
Alphabiz Reporter Paul Lee(hoondork1977@alphabiz.co.kr)
