SEOUL — BKR Co., the operator of the fast-food brand Burger King, has been fined ₩300 million by the Korea Fair Trade Commission (KFTC) for allegedly forcing its franchisees to use specific, hard-to-find U.S. brand cleaning products and KFTC-approved domestic tomatoes. The KFTC deemed these actions an unfair trade practice, issuing a corrective order and the fine.
According to a KFTC investigation, BKR Co. listed 15 types of cleaning products and tomatoes as “recommended” items in its disclosure document, allowing franchisees to purchase them from any supplier as long as they met the company’s standards. However, the investigation found that BKR Co. effectively mandated the use of specific products that were difficult to find on the market and available only through its internal purchasing system.
Furthermore, store inspections were conducted to verify the use of approved products. Failure to comply resulted in demerits on the franchise’s evaluation score. If the score fell below a certain threshold, the franchisee faced penalties such as official warnings, suspension of delivery services, or even temporary business shutdowns. In the case of tomatoes, the KFTC noted a particularly severe policy where the use of unapproved products would result in a score of zero, regardless of other factors, with threats of store closure or contract termination.
The KFTC concluded that the cleaning products were not directly related to the taste or quality of Burger King's core product, the hamburger. The commission also found that purchasing them directly from the headquarters was not essential for maintaining brand image. By designating only specific products as "useable" and effectively compelling franchisees to buy them from the headquarters, BKR Co. was found to have violated Article 12, Clause 1, Sub-clause 2 of the Franchise Business Act (Restriction on Business Counterparties).
Additionally, the KFTC pointed out that BKR Co.'s failure to properly disclose the significant consequences—penalties based on inspections—while listing the items as "recommended" constituted a deceptive provision of information, a violation of Article 9, Clause 1, Sub-clause 2 of the same act.
A KFTC official stated, "This action penalizes a franchisor that has indirectly mandated items unrelated to business uniformity, thereby shifting the burden onto franchisees. We will continue to monitor and address unfair practices that hinder franchisees' rational decision-making or infringe upon their economic interests."
BKR Co. responded to the sanctions, stating, "We have only recommended the use of certain items in line with global headquarter procedures to maintain consistent quality and hygiene across all Burger King stores worldwide. There have been no instances of franchisees being penalized for this reason." The company clarified that the cleaning products were suggested to ensure they were free of harmful substances, and the tomatoes were provided at a loss. BKR Co. also explained that the term "closure" in its policy merely referred to a two-hour period for corrective action, and no actual business shutdowns had occurred.
However, BKR Co. acknowledged that its prior communication with prospective franchisees was inadequate and committed to enhancing transparency by supplementing its disclosure documents and guidance procedures.
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