Franchise Sales Projections Korea rules require franchisors to be careful when providing prospective franchisees with expected sales or revenue information.
Under Korea’s Franchise Business Act, false or exaggerated information can create serious legal problems. This is particularly important when sales figures are included in a Franchise Disclosure Document or presented during franchise recruitment.
Franchise Sales Projections Korea: What Can Go Wrong?
A franchisor must not provide information that is false, exaggerated, or misleading to prospective franchisees.
This applies to important financial information such as expected sales, profits, and historical sales performance.
When certain franchisors provide expected sales figures, Korean franchise law also requires those figures and their calculation basis to be provided in writing and supporting materials to be retained.
For more background on disclosure requirements, see Pureum Law Office’s guide to the Korean Franchise Disclosure Document.
Franchise Sales Projections Korea: A Real Case
A Korean case shows how inaccurate sales information can create compliance problems.
A franchisor reported regional average annual sales figures in its Franchise Disclosure Document. However, the reported figures were substantially higher than the actual averages.
According to the case materials, actual average sales were approximately KRW 206 million in Seoul, KRW 287 million in Gyeonggi, and KRW 157 million in Incheon.
The registered disclosure document instead stated approximately KRW 427 million, KRW 437 million, and KRW 557 million respectively.
The figures were therefore overstated by approximately 52.4% to 254.7%.
The Fair Trade Commission found that this constituted false or exaggerated information.
Why Accurate Sales Information Matters
Sales information can strongly influence a prospective franchisee’s decision.
A person considering a franchise may rely on regional sales figures to estimate whether the investment is commercially viable. Inflated numbers can therefore give a misleading impression of the franchise’s performance.
Korean franchise law addresses this risk by requiring transparency and restricting false or exaggerated information. The KFTC also treats false or exaggerated information in franchise transactions as a prohibited practice.
Importantly, inaccurate information can lead not only to regulatory action but also to disputes with franchisees.
Be Careful With Expected Sales Statements
Franchisors should avoid making unsupported statements such as:
- “You can expect this level of monthly sales.”
- “Most stores earn this amount.”
- “Sales will increase significantly after opening.”
If sales projections are provided, the calculation should be based on reliable data and comply with applicable Korean franchise requirements.
The safest approach is simple: do not make a financial claim unless you can explain and support how the number was calculated.
Businesses preparing to franchise in Korea should also review their disclosure obligations before recruiting franchisees. Pureum Law Office’s guide to Korean Franchise Disclosure Document registration provides a useful starting point.
For official information on Korean franchise regulation, you can also consult the Korea Fair Trade Commission.
Need Help With Franchise Sales Projections Korea?
If you are preparing a Franchise Disclosure Document or providing sales projections to prospective franchisees in Korea, it is important to make sure those figures are accurate and legally supportable.
Pureum Law Office can help review your franchise disclosure and compliance requirements.
For further questions, please email ask@pureumlawoffice.com.
Let us help.
This article is for general informational purposes only and does not constitute legal advice.
ATTORNEY | Founding Partner
Leveraging his vast experience and comprehensive knowledge, Simon has become an invaluable resource for foreigners facing a wide array of legal issues in Korea.
