[Alpha Biz= Reporter Kim Sangjin] The Korea Fair Trade Commission (KFTC) has imposed a corrective order and a fine of 280 million won on Kyochon F&B for abusing its superior position in transactions with suppliers in 2021. Kyochon justified lowering supply margins by claiming that its suppliers benefited from collecting used cooking oil. However, industry experts argue that the suppliers had no room to protest, deeming the actions as power abuse.

On the 14th, the KFTC announced the fine, stating that Kyochon unilaterally reduced the agreed distribution margin from 1,350 won per can (18 liters) to zero between May and December 2021 after the price of dedicated frying oil surged due to COVID-19.

In response, Kyochon stated, "This was a policy aimed at improving the profits of franchise owners, and the headquarters did not gain unfair advantages." They explained that maintaining the existing margin during the surge in oil prices would increase the burden on franchise owners, hence the reduction in supplier margins. According to Kyochon, the price of the dedicated frying oil they purchased increased by 26% in 2021 compared to the previous year.

While some improvements in franchise owners' profits were noted, suppliers reportedly suffered losses estimated at 715 million won. Since 2016, suppliers had charged a 10% sales margin to franchisees, but despite the elimination of the supply margin in May 2021, they did not raise the sales margin percentage. It was noted that while suppliers' distribution margins decreased, Kyochon F&B's margins slightly increased, indicating a disadvantageous change in trading conditions.

 

 

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