Davich Optical fined 1.5 billion won for forcing sales targets on franchisees

Davich Optical, the franchisor of the optical chain, has been fined approximately 1.5 billion won for allegedly forcing franchisees to meet specific sales targets for various products. The Fair Trade Commission (FTC) announced on August 17 that it would impose corrective orders, including a cease and desist order, a notification order, and a payment order, along with the fine of 1.477 billion won for violations of the Franchise Business Act.

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Franchisees were forced to artificially increase sales quantities to achieve the target sales ratios for these products.

According to the FTC's investigation, Davich Optical set target sales ratios for eight product categories, including strategic frames priced over 100,000 won, clear myopia lenses, and presbyopia-specific products. The company reportedly monitored franchisees' achievement of these sales ratios monthly. Stores that failed to meet the targets faced penalties: one missed target required workshop attendance, two consecutive misses necessitated the submission of a recovery plan, and three consecutive misses led to a notice of potential franchise termination.

The FTC criticized Davich Optical for abusing its dominant position to increase sales of its own brand products, stating, "Franchisees were forced to artificially increase sales quantities to achieve the target sales ratios for these products." Additionally, Davich Optical was found to have required 193 franchisees to replace their signage when introducing a new corporate identity (CI), but it did not bear its legal share of the 20% cost. Similarly, it required 15 franchisees to undertake store environment improvements but excluded supervision fees from the cost-sharing, failing to cover its 20% legal obligation.

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We adjusted standards with franchisees to manage expertise and service quality, and provided education and management support when standards were not met. This is part of a system that has been evaluated as 'forcing sales targets.'

Furthermore, Davich Optical imposed the costs of 652 advertisements and 87 promotional events on all franchisees without obtaining prior legal consent. In response, Davich Optical stated that its actions were part of a system to manage expertise and service quality, involving adjustments and support for underperforming stores. The company argued that the FTC's assessment of "forcing sales targets" did not fully reflect the system's purpose and operation. Davich Optical plans to thoroughly review the final decision and provide its explanation.

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The purpose and operational methods of the system were not sufficiently reflected in the judgment.