Speaking to Nearby Franchisees in South Korea: Questions to Ask and Checks to Make Before Signing

It can be difficult to picture day-to-day life after opening a business from discussions with a franchise brand alone. Meeting existing franchisees can reveal things that documents rarely capture: how much time owners spend on site, unexpected tasks and how they communicate with the franchisor. Before joining a franchise network, use conversations with nearby franchisees not simply to check the brand’s reputation, but to assess whether its operating model suits you. The aim is not to collect positive reviews, but to establish whether you could run the business in the same way under your own circumstances.

1. Distinguish recommended outlets from the statutory list of nearby franchise outlets

Franchise transactions in South Korea are governed by the Fair Transactions in Franchise Business Act. Under Article 7(2), a franchisor must provide a document listing nearby franchise outlets when it supplies its disclosure document. The list must include the business names, addresses and telephone numbers of the 10 franchise outlets closest to your proposed location.

However, if fewer than 10 franchise outlets are trading within the relevant metropolitan city or province when the disclosure document is provided, the list must cover all franchise outlets in that area. A list containing fewer than 10 outlets does not therefore automatically indicate an omission. First check how many franchise outlets actually operate in the area and the criteria used to compile the document.

A list of successful outlets or demonstration sites recommended by the franchisor is not a substitute for this document. Visiting only the outlets suggested by a sales representative may skew your judgement towards the experiences of high-performing businesses. Request the recommended outlet list and the statutory document separately, then compare them.

When you receive the document, check the following:

• Does the proposed business address used to compile the list match the location you are considering?
• Are every outlet’s business name, address and telephone number included?
• If online searches show different outlets from those listed, is there an explanation, such as relocation or closure?
• If the list contains only recommended outlets and omits nearby ones, have you been given an explanation of the selection criteria?

If your proposed location changes, do not simply reuse the old list. Ask the franchisor to check it against the new location. Keep the file and a record of the date you received it. The list helps you identify outlets to contact; it does not guarantee that their owners will answer your questions or disclose business information.

2. Choose comparable outlets and prepare for the conversation

Even nearby outlets can operate under very different conditions. A small outlet in an office district and a spacious one in a residential neighbourhood may differ in everything from peak visiting times to staffing needs. Rather than choosing outlets solely because they have high sales, first decide which conditions will make them useful comparisons for your proposed business.

Useful criteria include outlet size, the nature of the local trading area, opening date, whether the owner works on site, and the proportion of delivery or takeaway orders. Recently opened outlets can offer insight into the difficulties of getting started, while longer-established businesses can explain recurring operational pressures. Seek a range of experiences, but record the differences in circumstances.

When making contact, explain that you are considering a franchise agreement and ask when a brief conversation would be convenient. Avoid arriving unannounced during the lunch or evening rush and launching into questions. You can also politely ask whether it would be possible to speak without a franchisor representative present.

Do not interpret an owner’s refusal to meet or answer certain questions as evidence of a problem with the brand. Sales and costs are sensitive business information. Ask permission before recording a conversation or photographing documents. If you intend to share what you hear with the franchisor, also check whether the owner is comfortable with their outlet being identified.

Sending your questions in advance makes it easier for the owner to decide what they are willing to discuss. Keep the list focused on matters that could genuinely affect your decision to invest. Briefly explaining your available working hours, operating experience and proposed outlet size can also help you obtain more relevant answers.

3. Ask about specific operating experiences, not just satisfaction

A question such as “Is this a good brand?” is likely to elicit personal likes and dislikes. Instead, ask about specific, recent situations. Establishing whether an inconvenience was a one-off or a recurring issue, and whether the franchisor resolved it, makes the answer more useful.

First, establish what work the owner actually does. Alongside “How many hours do you work each day?”, ask which tasks they handle themselves, including opening preparations, closing, ordering supplies and managing staff. It also matters who provides cover when an employee is absent. Do not assume that an outlet sustained by an owner’s long working hours could be run primarily by employees.

Second, ask about pressures they had not anticipated before opening. Try asking, “What took more time or money than you originally expected?” If they are reluctant to disclose exact figures, knowing which items created extra pressure and when can still be helpful. Distinguish between issues specific to that outlet and those that also arise elsewhere in the network.

Third, explore differences between the franchisor’s explanations and the owner’s experience. Ask for a real example: “When you needed help, how did you request it, and what happened after you received a response?” Details of the enquiry, the process and whether the issue was resolved are easier to compare with your expectations than a vague assurance that communication is good.

Fourth, clarify the basis of any figures relating to earnings. If an owner refers to “money left over”, check whether this accounts for their own labour, rent, loan repayments and other relevant outgoings. Rather than requesting detailed records straight away, first ask what has been deducted. It is also important not to treat a strong month’s results as representative of the annual average.

Finish by asking, “If you were considering signing again, what would you check first?” Record rumours about other outlets separately from first-hand experience. One owner’s comments are not enough to establish unlawful conduct by the franchisor or the profitability of the network as a whole.

4. Clarify differences with the franchisor and use the findings in your decision

After your conversations, compare answers under consistent headings rather than relying on memory. For each outlet, record the visit date, operating conditions, first-hand experiences shared and points requiring further checks. Separating “what the owner said”, “what I observed” and “what I inferred” can help prevent overinterpretation.

For example, if two outlets give conflicting accounts of staffing, you do not need to start by deciding which is right. First look at whether they have different peak ordering times, layouts or owner working patterns. If differences persist even under comparable conditions, record them as points requiring an explanation from the franchisor.

Where an owner’s account conflicts with what the franchisor has told you, send specific questions in writing. “Please explain the basis for the staffing levels and division of duties needed to run my proposed outlet without the owner being on site” is more useful than “Owners say it is hard work.” Do not pass on confidential documents received from an owner without permission.

Existing franchisees’ experiences are valuable due diligence evidence, but they do not determine your contractual rights. You must separately establish whether support or exceptional terms offered to another outlet would also apply to yours. Check the franchisor’s answers against the relevant provisions in the disclosure document and franchise agreement.

It is safer to base your decision on unresolved risks than on the number of positive answers you receive. If you have not examined enough comparable outlets, or have not received answers about important differences, postponing your decision until those checks are complete is a valid option.

Practical summary: obtain the statutory list of nearby franchise outlets and ask owners operating under similar conditions the same questions. Clarify differences in their answers with the franchisor in writing, then assess whether you can realistically manage the business. That is the purpose of these conversations.