System and Qualification of Franchise Traders
System of franchise traders
- The system of franchise traders is adopted to prevent damages caused by the lack of experience, expertise, etc. of a prospective franchisee by training experts with ability and talent in the franchise business to provide a prospective franchisee with legal services at an affordable cost.
Acquisition and limitation on the qualification of franchise traders
- Any person who successfully passes the franchise trader qualifying examination conducted by the Fair Trade Commission and who completes on-the-job training shall be qualified as a franchise trader (Article 27(1) of the 「Fair Transactions in Franchise Business Act」).
- No person who falls under any of the following categories shall be qualified as a franchise trader (Article 27(2) of the 「Fair Transactions in Franchise Business Act」).
· A minor or a person under adult guardianship
· A person declared bankrupt but not reinstated yet
· A person for which two years have not passed since his/her imprisonment without labor or any more severe punishment by a court was completely executed (or is deemed to be completely executed) or exempted
· A person who is under a suspension of the execution of his/her imprisonment without labor or any more severe punishment by a court
· A person for which two years have not passed since his/her registration as a franchise trader was revoked
- Where a person who has applied for the examination engages in cheating, the relevant examination shall be nullified, and such person shall be disqualified from taking the examination again for five years from the date on which he/she applied for the examination (Article 27(3) of the 「Fair Transactions in Franchise Business Act」).
Prohibition on lendingregistration certificates of franchise traders
- No franchise trader shall lend its registration certificate toany third person nor shall it borrow another person's registration certificateof a franchise trader. In addition, no person shall arrange such prohibitedacts (Article 29-2 of the Fair Transactions in Franchise Business Act)
※A person who lends or borrowsa registration certificate of a franchise trader or a person who arranges such,in violation thereof, shall be punished by imprisonment with labor for not morethan one year or by a fine not exceeding 10 million won. (Article 41(4) of the FairTransactions in Franchise Business Act)
Duties and Responsibilities of Franchise Traders
Duties of franchise traders
- A franchise trader shall undertake the following duties (Article 28 of the 「Fair Transactions in Franchise Business Act」).
· Review of the business value of a franchise
· Preparation and modification of information disclosure statements and franchise agreements, or provision of advice and suggestions thereon
· Provision of advice and suggestions on charges to franchisers, and terms and conditions of franchise business activities
· Provision of education and training of franchisees and advice and suggestions thereon
· Acting as an agent for filing an application for mediation of disputes arising from franchise business transactions
· Acting as an agent for registering an information disclosure statement
Responsibilities of franchise traders
- A franchise trader shall perform his/her duties in good faith and maintain sound ethics (Article 30(1) of the 「Fair Transactions in Franchise Business Act」).
- In performing his/her duties, no franchise trader shall intentionally conceal the truth or make a false report (Article 30(2) of the 「Fair Transactions in Franchise Business Act」).
Revocation of Registration of Franchise Traders and Suspension of Qualification
Revocation of registration of franchise traders
- In any of the following circumstances, the Fair Trade Commission may revoke the registration a registered franchise trader (Article 31(1) of the 「Fair Transactions in Franchise Business Act」).
· The franchise trader is registered or renews his/her registration by fraudulent or otherwise improper means
· The franchise trader becomes disqualified
· The franchise trader divulges confidential information known to him/her to any third party in the course of performing his/her duties
· The franchise trader lends his/her registration certificate to any third party
· The franchise trader inflicts serious damage upon any third party by intention or gross negligence
※ However, if the franchise trader is registered or renews his/her registration by fraudulent or otherwise improper means or becomes disqualified, the registration must be revoked (Proviso to Article 31(1) of the 「Fair Transactions in Franchise Business Act」).
※ Where the Fair Trade Commission intends to revoke the registration of a franchise trader, it shall hold a hearing (Article 31(3) of the 「Fair Transactions in Franchise Business Act」).
- A person whose registration as a franchise trader is revokedshall return his or her registration certificate to the Fair Trade Commissionwithout delay (Article 31(3) of the Fair Transactions in Franchise Business Act)
Suspension of qualification of franchise traders
- A franchise trader who is registered shall renew his/her registration every five years. A franchise trader who fails to renew his/her registration shall lose his/her qualification. In this case, his/her qualification shall be reinstated when the franchise trader receives in-service training and completes the renewal of his/her registration, as prescribed by Public Notification of the Fair Trade Commission (Article 29(2) and 31(2) of the 「Fair Transactions in Franchise Business Act」).