Young Pizza fined 200 million won for forcing franchisees to cover delivery costs

Young Pizza, a pizza franchise, has been fined nearly 200 million won by South Korea's Fair Trade Commission (FTC). The company is accused of forcing its franchisees to cover the entire cost of delivery fees, which are paid by consumers. Additionally, the FTC found that Young Pizza imposed excessive penalties for franchisees who terminated their contracts early.

According to the FTC's investigation, BSB Food, the parent company of Young Pizza, included a special clause in its franchise agreements since March 2021. This clause set the delivery fee paid by consumers to zero for all orders placed through delivery platforms. While the terms were adjusted over time, the zero-delivery-fee policy for basic distances remained until January 2025.

The company allegedly monitored franchisees' compliance with this clause. Those who violated it faced consequences such as contract termination or refusal of renewal. The FTC stated that the zero-delivery-fee clause, presented as a way to increase franchisee sales, actually reduced their operating profits and was therefore an unfair practice.

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The zero-delivery-fee clause, presented as a way to increase franchisee sales, actually reduced their operating profits and was therefore an unfair practice.

Furthermore, BSB Food was found to have imposed disproportionately high penalties on franchisees for purchasing supplies from sources other than those designated by the company or for early contract termination. Between July 2021 and November 2024, the company levied 1.11 billion won in penalties. In some cases, the cost of the independently purchased items was as low as 5,100 won to 114,000 won, yet the penalties ranged from 3 million to 20 million won. The FTC deemed these penalties excessive compared to the actual loss in operating profit.

In addition to these issues, BSB Food also failed to comply with legal requirements regarding the provision of information disclosure statements to prospective franchisees. The company did not provide these statements at least 14 days before contract signing, as mandated by law.

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The penalty amount was excessive compared to the loss in operating profit.