Preparing a Nearby Franchise Outlet Statement in South Korea: Managing Records from Your First Outlet

When you turn an existing retail business into a franchise, prospective franchisees will want to look beyond the franchisor’s explanations and see how actual franchise outlets operate. This is where the nearby franchise outlet statement comes in. Treating it as a simple contact list can hinder their assessment if outlets are missing or addresses are wrong. To build a trusted franchise community, decide from the first recruitment stage which outlets to include, when to provide the statement and what records to keep.

1. Why it must be prepared alongside the disclosure document

Franchising in South Korea is governed by the Fair Transactions in Franchise Business Act. Under Article 7 of the Act and the relevant provisions of its Enforcement Decree, franchisors must provide prospective franchisees with a nearby franchise outlet statement when supplying the disclosure document. As a general rule, the statement must list the trading names, addresses and telephone numbers of the ten franchise outlets closest to the proposed outlet. If there are fewer than ten franchise outlets within the upper-tier local authority area—such as a province or metropolitan city—where the proposed outlet will be located, all franchise outlets in that area must be listed.

If the proposed outlet’s location has not yet been decided, the statement must be provided as soon as it is confirmed. A general outlet list supplied during initial discussions should therefore not be treated as the final statement. If the confirmed address differs from the candidate address, check the selection of outlets again.

In principle, the law prohibits signing a franchise agreement or accepting franchise fees until 14 days have passed since the registered disclosure document and the nearby franchise outlet statement were provided. This period can be reduced to seven days where the prospective franchisee has received advice on the disclosure document from a lawyer or a qualified franchise transaction specialist. If the two documents were delivered on different days, make sure the contract timetable is not based solely on the date of the earlier disclosure document.

This statement is not a list of high-performing outlets recommended by the franchisor. It is a statutory document that allows prospective franchisees to identify and contact nearby franchise outlets. Avoid including only franchisees you know well or those who are willing to help with recruitment discussions. Keep the statutory selection process separate from any recommendations for outlet visits.

2. Distinguish your source records from the first recruitment campaign

Do not list company-owned outlets as franchise outlets simply because you do not yet have any franchisees. Visits to company-owned outlets can help demonstrate how the business operates, but they are no substitute for checking outlets run by independent franchisees at their own risk. If there are no franchise outlets in the relevant area, state this clearly. It is advisable to check the format and method of provision with the professional handling your franchise registration work.

Start by creating a central outlet register. The following fields provide both the source data and the supporting records needed to prepare the statement.

• Outlet type: clearly identify whether the outlet is company-owned or franchised.
• Outlet identification: record its internal reference number and actual trading name.
• Location: verify its road-name address, including the floor and unit number within the building.
• Contact details: check the outlet telephone number that customers or other external callers can use.
• Operating status: record whether the outlet has opened, relocated, temporarily closed or permanently closed, along with the date this was checked.
• Basis for changes: retain evidence supporting updates, such as notifications from franchisees or checks by the staff member responsible.

Distinguish between information needed for internal records and information supplied externally. Preparing a statutory document does not justify routinely sharing franchisees’ personal mobile numbers, home addresses or private consultation histories. Establish a process for selecting only the information relevant to the document’s purpose.

Also avoid presenting outlets that are due to open as if they are already trading. Where an outlet’s status is unclear, for example because it is temporarily closed or relocating, staff should not simply leave it out at their own discretion. Verify the facts and review how it should be recorded. Accurately reflecting the situation matters more than producing a tidy-looking list.

3. Make the selection of nearby outlets reproducible

As the network grows, it becomes harder to select nearby franchise outlets from memory alone. Start with the exact address of the proposed outlet, then check the number of franchise outlets within the relevant upper-tier local authority area and the location of each. Apply the statutory geographical scope and outlet-count criteria before selecting the nearest outlets.

It is good practice to set internal standards that use the same mapping data and a consistent method for measuring distance. However, do not suggest that a particular mapping service or your own calculation method is prescribed by law. Where judgement is needed, such as for outlets near administrative boundaries or at almost identical distances, record the reasons for your selection and the review undertaken.

Separating preparation and checking duties can reduce errors. The preparer should cross-check the candidate address against the outlet register, while the reviewer checks for omitted outlets and incorrect contact details. Include an ‘as at’ date and the proposed outlet address in the final statement so that its basis is clear.

For example, even if a prospective franchisee changes their preferred site within the same city, the ranking of the nearest outlets may change. Rather than editing a single address line in the existing file, repeat the selection process. If the site moves to another upper-tier local authority area, start by checking the total number of franchise outlets in that area again.

4. Plan delivery records and guidance on contacting outlets together

Once the final statement is ready, you should be able to demonstrate who received which version and when. Check the legally prescribed methods of provision, and retain both the file actually delivered and evidence of receipt. An internal note saying that the document was sent should not, by itself, be treated as proof that it was received.

For each prospective franchisee, record the proposed address, the statement’s ‘as at’ date, the date provided, evidence of receipt and whether a revised statement has been supplied. Link this to the disclosure document delivery record when checking the earliest permitted contract date. If an address changes or an error is found in the list, provide a corrected version and check its effect on the statutory waiting period before finalising the contract timetable.

Giving existing franchisees advance notice that their outlet contact details may be shared through the statutory statement can help prevent confusion. However, do not require them to give scripted answers to prospective franchisees or pressure them not to discuss negative experiences. Trust within a franchise community starts with respecting real operating experience.

Encourage prospective franchisees to avoid busy trading periods and contact outlets before visiting. You can suggest that they focus their questions on practical experience, such as difficulties during opening preparations, how franchisor support works in practice and day-to-day workload. Also explain that another outlet’s experience does not guarantee their own sales or profits.

Action summary: Before recruiting your first franchisee, prepare the outlet register, selection criteria, document template and receipt-confirmation procedure as one package. Once the proposed address is confirmed, verify the list and check how the document delivery dates affect the contract timetable.