The Fair Trade Commission has imposed a penalty of 500 million won to Pizza Hut Korea for charging "admin fees" to its franchisees without specifying the fee item in the contract. This was reported by Korean language Hankuk kyeongje this morning. According to the competition watchdog on January 3, Pizza Hut has collected admin fees by newly inserting in the contract provisions without explicit consent of the franchisees. The total amount it has collected under this name reaches 6.8 billion won.
The international pizza chain has created the new franchise fee item in exchange for services rendered to its franchisee stores in the form of support in purchasing, marketing, and sales. The company didn't bother to get consent from the franchisees when it revised the contract.
It also raised the fee amount unilaterally. The 0.55-percent admin fee that had been in place for eight years since December 2004 was raised to 0.8 percent of sales revenue from May 2012.
A Fair Trade Commission official said, "Pizza Hut Korea notified its member stores in 2012 that it would raise the admin fee rate even when the overall sales revenue was in decline. It constitutes the large franchiser's unfair practice in forcing unfavorable terms to franchisees based on its dominant position."
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