— Of 77 franchisers in the wholesale/retail and service sectors, 67 companies reflected the requirement in their franchise agreements, while 41 companies remain non-compliant due to omitted items or inconsistent application across all franchise contracts —
August 12, 2026
The Korea Fair Trade Commission (KFTC, Chairperson Biung-Ghi Ju) announced the results of its inspection, conducted in June–July, into the actual state of compliance regarding the stating of mandatory purchase items in franchise agreements. "Mandatory purchase items" refers to raw materials and supplies that a franchisee is required to purchase from the franchisor or a person designated by the franchisor.
This inspection was conducted to determine whether franchisors are entering into revised franchise agreements in accordance with the amended Fair Transactions in Franchise Business Act, which took effect on January 2, 2025, and which requires franchise agreements to state the types of mandatory purchase items and the method for calculating their supply price. The purpose was to encourage the prompt establishment of this regulatory improvement in practice.
A similar inspection of compliance with the obligation to state mandatory purchase items in franchise agreements was conducted last year, targeting 75 franchisors in the food service industry. This year, the KFTC received contract status information and copies of contracts from 100 major franchisors in the wholesale/retail and service sectors for review.
The inspection found that of the 100 franchisors in the wholesale/retail and service sectors, 23 had no mandatory purchase items at all, leaving 77 franchisors as the group actually required to state mandatory purchase items in their franchise agreements.
Among these 77 franchisors that do have mandatory purchase items, 10 companies failed to reflect the requirement in their franchise agreements at all, either because they mistakenly believed they had no mandatory purchase items or because they were unaware of the legal amendment.
Of the 67 franchisors that made an effort to reflect the requirement in their franchise agreements, 55 companies fully reflected both the types of mandatory purchase items and the method for calculating supply prices, while 12 companies omitted some of the required information.
Regarding how the types of mandatory purchase items were stated, 65 companies (97%) listed specific individual items, while 2 companies (3%) listed only general categories.
Regarding how the supply price calculation method was stated, 55 companies(85.9% of the 64 companies that stated a supply price calculation method)complied with the KFTC's guidelines by specifically stating the determination criteria or the range of price increases.
The KFTC plans to grant a one-month voluntary correction period to the 51 companies that either failed to state, in whole or in part, the types of mandatory purchase items and the supply price calculation method in their franchise agreements, or that have franchisees to which such terms were not applied.
In addition, during the voluntary correction period, the KFTC will collect and review information on contract amendments, and will continue its efforts to ensure that this regulatory improvement becomes firmly established in practice.