Planning Opening Hours Before Franchising: Managing Late-Night Losses and Requests for Shorter Hours

When turning an existing business into a franchise, opening hours are an operating condition that is easily copied across. Yet the hours sustained by a founder working late at a company-owned outlet may not be sustainable for franchisees and their staff. Operating standards for a franchise network need to account for profitability by time of day and individual outlet circumstances, as well as customer convenience. Before signing the first franchise agreement, the priority is not a blanket commitment to long opening hours, but a clear procedure for setting and adjusting them.

1. Check the legal limits before setting standard opening hours

Franchising in South Korea is governed by the Fair Transactions in Franchise Business Act. Article 12-3 prohibits franchisors from imposing unfair restrictions on opening hours. In particular, refusing a request for shorter hours from a franchisee who meets the statutory conditions relating to losses from late-night trading may breach the law. Avoid rejecting all requests on the grounds of brand consistency.

However, low evening sales on a single day do not give every request for shorter hours the same legal standing. The applicable late-night period, the duration of losses and the method of assessment must be checked against the requirements of the current Act and its Enforcement Decree. When drafting the agreement, it is advisable to have a qualified Korean franchise transaction specialist or lawyer confirm the scope of the provision and the procedure for handling requests.

Your internal rules should distinguish between requests for shorter hours protected by law and adjustments the franchisor permits at its discretion. The former are not simply a matter of goodwill or discretion. The latter can be managed under separate criteria that account for seasonal demand, changes in the local trading area and building access hours. Keeping the two procedures separate reduces the risk of staff confusing a legal entitlement with an ordinary request for an exception.

Nor does obtaining a franchisee’s consent in the agreement remove the legal restrictions. Rather than stating that ‘opening hours may not be changed under any circumstances’, it is safer to specify the standard hours, the application process for changes and exceptions required by law. The record sheets and review methods below are practical suggestions, not substitutes for the statutory requirements themselves.

2. Isolate the true burden of late-night trading at company-owned outlets

Standard opening hours should be tested against operating data by time of day, rather than total sales at company-owned outlets. An outlet may be profitable over the whole day while generating insufficient sales during its final few hours to cover additional staffing and electricity costs. Conversely, even if late-night sales appear low, allocating costs already incurred during the day a second time can exaggerate losses.

Create a time-of-day monitoring sheet that records the following items consistently.

• Sales performance: Distinguish order times, cancellations and refunds, and sales after discounts.
• Product-related costs: Record the ingredients and packaging actually used for sales, along with waste by time of day.
• Staffing: Record shift start and finish times, closing tasks and any shifts covered by the founder.
• Additional operating costs: Collect identifiable costs, such as delivery commissions and extra heating, cooling and lighting.
• Demand conditions: Note the day of the week, weather, nearby events and any temporary promotions.

If the founder handles closing duties without pay, do not assume a franchisee can do the same. Internal viability analysis should separately calculate the cost of employing someone to cover that work. However, these internal projections serve a different purpose from the evidence used to assess losses under the law. A single calculation should not be presented as a legal conclusion.

Checking sales immediately before closing is not enough either. Measure how long cleaning, cashing up and organising stock take after orders stop. If a later finish also affects staffing for the following day’s preparations, reflect that burden in the operating model. Standard hours must account for both the times displayed to customers and the hours people actually work.

3. Document requests for shorter hours from receipt to decision

Prepare an opening-hours change request form before recruiting your first franchisee. It should cover current hours, proposed hours, the reason for the change, the preferred start date and supporting evidence. Rather than demanding extensive paperwork at the outset, explain which key information is needed for the review and make specific requests for anything missing. There is no need to make franchisees resubmit sales data the franchisor already holds.

It is helpful to separate responsibility for receiving requests from responsibility for deciding them. Field staff can check the evidence and operating circumstances, while the decision-maker reviews the legal requirements and internal criteria. Seek professional advice where legal review is needed. Set a target response time, but ensure internal deadlines do not become a reason to delay compliance with statutory obligations.

Do not rely on verbal notification of the outcome. Document the facts accepted, any points requiring further checks, the reasons for the decision and the date it takes effect. If you decide a request cannot be granted, explain the specific reasons and how it can be reconsidered, rather than simply citing ‘head office policy’. Avoid repeatedly asking for further information as a way of effectively postponing a decision.

For example, late closing hours may have been based on a company-owned outlet near a railway station, while a franchise in a residential area reports losses from late-night trading. The relevant comparison is not the company-owned outlet’s total daily sales. You need to examine the franchise outlet’s sales and costs during the relevant hours, alongside the applicable legal requirements. A request should not be refused merely because other outlets keep the same hours.

4. Apply the same standards in contracts and day-to-day operations

Opening-hours standards will not work if they appear only in the contract. Cross-check franchise recruitment materials, the relevant operating conditions in the disclosure document, the franchise agreement and the operations manual. South Korean franchise law also imposes obligations to register and provide disclosure documents, so check that the relevant disclosures match what prospective franchisees are actually told. Avoid promising flexible hours during recruitment and then insisting on uniform hours once the agreement is signed.

The manual should cover the practical steps required after a change is approved. Customer notices, order cut-off times, delivery platform opening-hour settings, staff rotas and delivery schedules all need to be updated together. Unless you assign responsibility and set a timetable for notifying customers, a franchisee may have approval for shorter hours but still be unable to close because of late orders or deliveries.

Once the change takes effect, you can review operations within the agreed scope. However, a review must not be used as a pretext to arbitrarily withdraw a legally protected reduction in hours or disadvantage the franchisee. For a temporary change granted at the franchisor’s discretion, record the duration and conditions for further discussion clearly from the outset. The purpose of monitoring is to resolve operating problems, not to discourage requests.

Practical takeaway: Before signing the first franchise agreement, prepare a time-of-day operating record sheet, a request form for shorter hours and a written decision notice. A procedure that respects legal rights while checking actual costs will help prevent opening hours from becoming a recurring source of conflict across the franchise network.