[Policy Insight] How Many Franchise Owners Must Unite to Gain 'Bargaining Power'? Headquarters vs. Owners' Tug-of-War

South Korea is set to implement a significant change in franchise law late this year, granting franchise store owners the collective right to negotiate with their parent companies. This amendment to the Franchise Business Act aims to level the playing field by empowering store owners who often operate with limited individual leverage against large corporations.

The new legislation will allow franchise owners to form associations that will possess collective bargaining power, akin to labor unions. This move is intended to address long-standing power imbalances within franchise relationships, where headquarters often dictate terms with little input from the individuals running the day-to-day operations.

However, a key point of contention has emerged regarding the threshold for recognizing these owner associations. Franchise headquarters argue that the minimum number of owners required to form a legitimate negotiating body should be set higher to ensure true representativeness. They express concern that a low threshold could lead to the proliferation of small, unrepresentative groups, complicating negotiations and potentially undermining the collective bargaining process. Store owners, conversely, are likely pushing for a lower threshold to facilitate easier formation of these groups and amplify their collective voice.

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If the standard is too low, groups with low representativeness will proliferate and demand negotiations.