- The Fair Trade Commission has ordered corrective measures and imposed a fine of 107.6 million KRW on Pizza & Company Co., Ltd., the franchisor operating the pizza brand “Banolim Pizza,” for (1) directly receiving franchise fees and training fees without depositing them in a designated institution, and (2) forcing franchisees to purchase pizza tripods and disposable forks exclusively from itself.
Pizza & Company changed its corporate name from Banolim Food Co., Ltd. to Banolim Pizza Co., Ltd. on February 23, 2023, and to its current name on May 9, 2025. As of the end of 2023, its sales amounted to 53.7 billion KRW, and it operated 353 franchise stores.
Between April 8, 2020, and December 25, 2021, the company directly received franchise and training fees from eight franchise applicants and franchisees into its own or branch office accounts.
According to Article 6-5 of the Fair Transactions in Franchise Business Act, franchisors are required to deposit franchise fees in designated financial institutions for a certain period to protect franchisees from losses that may occur if the franchisor fails to provide proper support, commits fraud, or goes out of business.
Thus, when a franchisor receives franchise or training fees before a store opens or within two months after signing the franchise contract, those funds must be deposited into a designated institution. However, if the franchisor has an insurance policy that compensates franchisees for potential losses, this requirement may be waived.
Pizza & Company did not have such insurance coverage in place but still collected franchise and training fees directly. Therefore, the FTC judged that this violated Article 6-5 of the Act and issued a corrective order.
Separately, between April 23, 2019, and April 24, 2023, the company designated pizza tripods (used to keep pizza boxes from collapsing) as essential items in its disclosure documents, and between April 11, 2022, and April 24, 2023, it did the same for disposable forks. Franchisees were required to purchase these items only from the headquarters or its designated suppliers.
If franchisees purchased these items elsewhere, they could face disadvantages such as supply suspension, contract termination, or penalty fees under the franchise agreement. Specifically, the contract stipulated a penalty of 50 million KRW for purchasing the items from unauthorized suppliers.
The company even inspected franchise locations to ensure that franchisees had purchased the required tripods from designated sources.
In other words, Pizza & Company enforced mandatory purchases of tripods and disposable forks by specifying them as essential items, stipulating penalties for noncompliance, and conducting on-site inspections.
However, since tripods and disposable forks are general consumer goods that can easily be substituted with products of equivalent quality, there was no justifiable need to restrict their purchase to designated suppliers for brand image consistency or product quality control.
Moreover, while other major pizza franchises treat these items as recommended—not mandatory—supplies, Pizza & Company’s coercive policy yielded approximately 8.6 million KRW in additional profits, a practice inconsistent with industry norms.
Accordingly, the Fair Trade Commission ruled that the company unfairly restricted franchisees’ business activities in violation of Article 12 (1) (2) of the Act and imposed corrective measures along with a fine of 107.6 million KRW.
This decision is significant in that it ensures the safety of franchise fees paid by franchisees and prospective franchisees by penalizing the franchisor’s direct receipt of funds that should have been deposited in a designated institution.