Antitrust regulator revamps franchise disclosure rules for prospective owners

The antitrust regulator said that revised franchise disclosure rules will expand information for prospective franchisees.

The commission said the revisions follow a comprehensive plan to strengthen franchisees' rights by addressing information asymmetry and an imbalance of power between franchisors and franchisees and improving franchisees' business conditions.

The Fair Trade Commission's overhaul of disclosure formats and standard forms takes effect Jan. 1, 2028. Other changes unrelated to the disclosure system took effect immediately. Applications for registration or changes filed before Jan. 1, 2028, will remain subject to the previous disclosure requirements.

Disclosures will add the number of franchise outlets operating for three, five or 10 years and their share of all franchise outlets. They will also show average operating penalties for agreements ended early and details of overseas franchise and company-owned outlets.

Total franchise and company-owned outlet data must be updated within 30 days after each quarter, rather than within 120 days after the end of every business year.

Required disclosures will specify upper and lower estimates for mandatory-goods purchases and whether some payments can be made in cash or by card. Initial registration applications must include documents verifying the operation and operating period of company-owned outlets. Franchisors seeking to cancel a disclosure registration must submit the original registration certificate with their request, and the FTC or provincial governors must record the cancellation in the franchise information system. The rules will remove merger and acquisition histories and details about executives unrelated to franchise operations from disclosures.

Authorities may adjust administrative fines for the duration and frequency of violations by up to 100 percent of the base calculation, from a previous limit of 50 percent. Fine calculations will also take into account the nature and circumstances of a violation and a franchisor's cooperation with an investigation.