Debate over 10% threshold for franchisee group registration: association proposes issue-by-issue checks on support

Ahead of the introduction of South Korea’s franchisee group registration scheme, debate is shifting towards eligibility for registration and how representative groups are on individual issues raised for discussion. In an interview with ChosunBiz, Na Myung-seok, chairman of the Korea Franchise Association, expressed concern about allowing groups representing 10% of a brand’s franchisees to register. He argued for either a higher threshold or a mechanism to verify support for each issue.

Registration eligibility and representation in discussions

In an interview held on 6 October at the association’s office in Yeouido, Seoul, Na outlined his views on the franchisee group registration scheme being developed by the Korea Fair Trade Commission (KFTC). The amended Fair Transactions in Franchise Business Act, due to take effect at the end of December, provides for qualifying franchisee groups to register with the KFTC. It also requires franchisors to engage in discussions when registered groups request them on trading terms and related matters.

Under this scheme, registration requirements mean more than simply qualifying for inclusion on a register. Because franchisors must respond to registered groups’ requests for discussions, eligibility determines which groups can enter into this formal relationship with the franchisor. It is this link between registration eligibility and representation that the association questioned in the interview.

However, the obligation to discuss matters with a registered group must be distinguished from an obligation to accept its demands in full. As reported, the amended law requires franchisors to engage in discussions when requested on trading terms and related matters. It should not be interpreted as a mechanism that automatically produces agreement on a particular issue or changes to trading terms.

This debate is also distinct from guidance on the scheme’s introduction. The central questions are where to set the entry threshold for groups taking part in discussions, and how to verify support for individual issues raised by a group that meets the registration requirements. Those in the franchise sector should consider these two questions separately.

‘10% or 1,000 members’ is the threshold in the draft enforcement decree

The draft amendment to the enforcement decree published by the KFTC in August would allow a group to register if its membership includes at least 10% of all franchisees operating under the same brand, or at least 1,000 franchisees. These are alternative criteria: groups would not have to meet both.

Where the 10% threshold applies, the draft also requires at least 30 members. Registration eligibility therefore cannot be assessed on the percentage alone. Both the percentage threshold and the minimum membership requirement must be checked to understand the proposal accurately. This is why ‘10% of all franchisees’ does not fully describe the registration threshold for every brand.

According to the interview report, the KFTC is also considering lowering this minimum membership requirement. The important point is that such a reduction is under consideration. The conditions in the August draft, options subsequently being considered and the requirements that will ultimately apply are at different stages of the policymaking process.

This distinction also matters when franchisors and franchisees assess the scheme. They should first establish whether a figure cited in the debate comes from the legislation, the draft enforcement decree or a stakeholder’s proposal. This will help avoid treating requirements that have not yet been finalised as binding obligations when preparing for registration or discussing consultation procedures.

The association’s alternative: verifying support or authorisation for each issue

The association’s position is that a group whose members account for just 10% of a brand’s franchisees cannot adequately represent all franchisees of that brand. It has therefore proposed either raising the registration threshold or retaining the 10% threshold with an additional safeguard. Both approaches address representation, but they seek to verify different things.

Raising the registration threshold would change the level of membership a group needs to qualify. The additional safeguard, by contrast, would assess support for the actual issues brought forward for discussion, independently of the group’s membership size. The intention is to distinguish membership of a group from support for a specific change to trading terms.

The association’s proposed safeguard would involve verifying support or authorisation from around 30–40% of all franchisees for the particular issue under discussion. This is a threshold the association considers necessary, not a registration requirement finalised by the KFTC or a new obligation coming into force. It would therefore be inaccurate to present it as a settled rule requiring 30–40% approval before discussions can take place.

Nor should this proposed figure be confused with the proportion of franchisees who belong to a group. The association explained that, even if the 10% registration threshold were retained, additional checks on support or authorisation for the actual issue would be needed. The question is not simply whether a registered group exists, but how broadly franchisees’ views should be verified on the matter it wishes to discuss.

What the sector should check: the status of each figure and the verification process

The interview sets out the association’s view that registration requirements and representation on individual issues should be considered together. It cannot, however, be taken as evidence of a shared position among all franchisees or a final decision to change the scheme. What is currently established is the discussion framework in the amended law, the registration thresholds in the draft enforcement decree and the association’s objections to those thresholds.

In practical terms, it helps to record the figures cited in the debate separately. Keeping the proposed membership percentage, minimum member count and the association’s suggested level of support for individual issues in distinct categories makes it easier to separate registration eligibility from the way discussions should be conducted. It also provides a basis for comparing what has been retained or changed once the final requirements are confirmed.

When reviewing how discussions should work, franchisors and franchisee groups may likewise find it useful to distinguish between procedures for verifying membership numbers and those for gathering views on individual issues. This does not mean treating the association’s proposal as an existing obligation. Rather, it recognises that the debate raises two separate questions about verification.

The practical takeaway is straightforward: distinguish registration eligibility from support for individual issues, and do not confuse draft provisions, options under consideration or association proposals with final rules. The priority is to confirm the final requirements before incorporating them into registration preparations and discussion procedures.