Understanding the Korean Franchise Agreement

Increasing your franchise into South Korea is a promising transfer—however provided that you’re ready. Some of the essential steps in establishing a profitable franchise operation in Korea is knowing the Korean franchise settlement, identified regionally as a “gamaeng gyeyakseo(가맹계약서).”

On this publish, we break down the important authorized parts of the Korean franchise settlement so you possibly can strategy growth with confidence and readability.

What Is a Korean Franchise Settlement?

A Korean franchise settlement is a legally binding contract that governs the connection between a franchisor and a franchisee in South Korea. It outlines the rights and obligations of each events, together with model utilization, coaching, assist, charges, period, renewal phrases, and dispute decision.

The settlement should adjust to Korea’s Truthful Transactions in Franchise Enterprise Act, which protects franchisees from unfair practices and promotes transparency out there.

Key Authorized Concerns for International Franchisors

1. Obligatory Disclosure Requirement

Earlier than any settlement is signed, franchisors should register their disclosure doc with the Korea Truthful Commerce Fee (KFTC). This doc consists of detailed details about the franchise system, financials, litigation historical past, and assist construction.

Failing to supply this doc or providing deceptive info may end up in penalties, together with nullification of the contract or fines.

2. Unfair Contract Phrases Are Invalid

South Korean courts will strike down contract clauses which are overly one-sided, unforeseeable, or that unduly prohibit a franchisee’s rights. Widespread pink flags embody:

Extreme penalties for breachUnilateral termination rights for the franchisorIndemnity clauses that unfairly protect the franchisor

3. Language and Translation

Whereas contracts may be drafted in English, the Korean model will usually prevail in courtroom. It’s finest observe to supply a high-quality bilingual model and make sure the Korean translation precisely displays the unique intent.

4. Jurisdiction and Governing Legislation

Korean courts usually assert jurisdiction over franchise disputes occurring inside Korea, particularly if the franchisee is a Korean enterprise. It’s essential to work with native counsel to make sure jurisdiction clauses are enforceable.

5. Renewal and Termination Procedures

The Truthful Transactions Act imposes particular procedures for non-renewal or termination. Franchisors should give advance discover and legitimate causes. Sudden or unfair termination can result in authorized legal responsibility.

6. Native Adaptation

A profitable franchise settlement in Korea ought to mirror native market norms. This consists of adjusting charges, coaching assist, and efficiency benchmarks to Korean enterprise expectations.

Skilled Perception by Michael Park, Esq.

With over 10 years of in-house counsel expertise at SPC Group, Michael is a veteran of Korea’s franchise business. He has led and managed main franchise operations for manufacturers like Shake Shack Korea, Dunkin’ Donuts, and Baskin Robbins, giving him unmatched perception into the authorized and operational realities of franchising in Korea. On the subject of the Korean Franchise Disclosure Doc, few perceive the system higher.

Ultimate Ideas: Authorized Recommendation Is Important

Getting into the Korean market is thrilling—but it surely requires cautious planning. A well-drafted, compliant Korean franchise settlement can shield your model, scale back authorized dangers, and set the muse for long-term success.

Partnering with native authorized professionals who perceive each Korean regulation and worldwide franchising is important.

Allow us to assist.

When you’ve got questions or want tailor-made authorized steering in your Korean franchise settlement, contact us at ask@pureumlawoffice.com. We’re right here that can assist you navigate the Korean market with confidence.