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BBQ becomes first in Korean franchise industry to vow disclosure of marketing margin

2017.07.27 16:54:03 | 2017.07.27 16:54:33
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South Korea’s chicken franchise Genesis BBQ facing boycott by its franchisees and scorn by the public as well as antitrust authority for spikes in prices and predatory practices announced a set of measures including disclosure of its marketing margin to become more transparent in business ways and compliant with fair competition regulations.

It will in return collect royalties for the use of its trademark, a common franchise practice in advanced markets, said the company CEO Kim Tae-cheon in a press conference Thursday.

“Disclosing marketing margin would be exposing our income structure, but we will risk it nevertheless as to win back consumer confidence,” he said.

The company will comply with a new regulation requiring food and dining companies to disclose the cost of purchasing items wholesale and the income made by selling them and if “deemed necessary” go as far as specifying the margin for each ingredient and item, he said.

Fair Trade Commission chief Kim Sang-jo recently said the antirust agency would embark on investigation on 50 food franchises and disclose their margin of profit from supplying key food ingredients and materials to their franchisees.

To ensure more transparent business practice, the chicken franchise operator is readying to go public. It plans to give its franchisee family priority in the purchase of the initial public offerings, the CEO said.

The company also will give member stores more freedom in purchases of the ingredients and food items except for the brand’s signature sauce mix and olive oil if they are not happy about the prices of their supplies. They will also be allowed greater freedom interior design of their stores.

In return, the company will levy royalty on the use of BBQ brand. He promised to find a reasonable rate so that it does not translate further burden onto franchisees.

The FTC chief meets with franchise operators Friday to discuss ways to improve unfair practices in the industry.

By Lee Hee-soo

[ⓒ Pulse by Maeil Business News Korea & mk.co.kr, All rights reserved]

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