Franchising has become a prevalent business model in Korea, đparticularly in sectors such as fast food, coffee, educational services, and beauty care. However, in order to safeguard the rights and interests of the parties involved—especially franchisees, Korea has established a relatively stringent legal framework. The principal legal basis is the Fair Transactions in Franchise Business Act, which is administered by the Korea Fair Trade Commission (KFTC).

I. Definition and scope of application

Under the law, franchise business refers to a transaction in which a franchisor grants another party (the franchisee) the right to use its trademark, business know-how, and operating system to conduct business, in return for the payment of certain fees by the franchisee.

The Act applies to all franchise agreements, both domestic and international, that are connected to the Korean market. This means that foreign enterprises seeking to expand their franchise systems into Korea are likewise subject to compliance with its provisions.

II. Obligations of the franchisor

One of the most significant provisions under Korean law is the obligation of disclosure.

• Registration of disclosure documents: Prior to commencing franchise operations, the franchisor is required to register a disclosure document with KFTC, providing information such as business history, financial status, number of existing outlets, contractual terms, and applicable fees.
• Provision of information to franchisee: The franchisor must deliver this disclosure document to the franchisee at least 14 days prior to the execution of the franchise agreement, ensuring that the franchisee has sufficient time for review.
• Prohibition of misrepresentation: The franchisor is prohibited from making exaggerated profit guarantees or concealing material risks. In the event of a violation, the franchise agreement may be declared null and void.

III. Rights and obligations of the franchisee

Korean law is designed to protect franchisees—who are often small businesses vulnerable to disadvantages compared to franchisors. Franchisees are granted the following fundamental rights:

• Right to receive clear and transparent information.
• Right to terminate the agreement if the franchisor is found to have intentionally concealed or misrepresented material facts.
• Right to be protected against being compelled to purchase goods or materials from an unreasonably exclusive source.

Conversely, franchisees also have obligations to comply with brand standards, maintain business confidentiality, and remit all fees in a timely manner.

IV. Franchise agreement

Franchise agreements in Korea must be executed in writing. Certain essential provisions must always be included:

• Term of the agreement and conditions for renewal.
• Types of fees, including franchise fees, training fees, and royalty fees.
• Rights and obligations of each party.
• Conditions for termination of the agreement.
• Dispute resolution mechanisms (court or arbitration).

The law also restricts franchisors from unilaterally terminating the agreement without just cause.

V. Enforcement and sanctions

KFTC has the authority to investigate violations in the franchise sector. If a franchisor is found to be in breach, the Commission may order corrective measures, impose administrative fines, and, in serious cases, refer the matter to criminal authorities.

Therefore, foreign enterprises seeking to enter the Korean franchise market typically rely on professional legal counsel to avoid regulatory violations.

VI. Conclusion

Franchise law in Korea both facilitates the development of the franchise model and establishes mechanisms to protect franchisees against legal risks. In a dynamic and highly competitive market, a thorough understanding of these regulations is essential for both Korean businesses and foreign enterprises seeking to invest through the franchise model.

VII. About NYLA – Korean Legal Office

■ NYLA – Your Trusted Legal Partner in Korea

At NYLA, we understand that the success of foreign businesses in Korea requires not only a solid business strategy but also reliable legal support. With a team of experienced Korean attorneys and legal professionals, NYLA provides tailored legal services for companies, investors, and individuals operating or planning to establish a presence in Korea.

We support our clients throughout the entire business journey with comprehensive services, including:

• Legal consultation on company establishment, taxation, and immigration;
• Advice on commercial real estate, franchising, and product distribution;
• Support in human resources, marketing, and business strategy.

In addition to legal advisory, NYLA also represents clients in civil litigation cases related to business, labor, marriage, family, and inheritance to ensure their rights and interests are fully protected.

■ Contact NYLA

If you’re a foreign business or individual looking for a reliable legal partner in Korea, NYLA is here to help. We are committed to delivering effective, practical, and personalized legal solutions for every client.

With a proven track record of assisting hundreds of international clients, our team is equipped to help you navigate complex legal challenges—whether it’s commercial disputes, contract issues, or foreign investment guidance.

Don’t let legal matters hold you back. Let NYLA be your trusted guide in the Korean market.

■ Get in touch with NYLA for expert legal support

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