Expanding your franchise into South Korea is a promising move—but only if you’re prepared. One of the most critical steps in establishing a successful franchise operation in Korea is understanding the Korean franchise agreement, known locally as a “gamaeng gyeyakseo(가맹계약서).”
In this post, we break down the essential legal elements of the Korean franchise agreement so you can approach expansion with confidence and clarity.
What Is a Korean Franchise Agreement?
A Korean franchise agreement is a legally binding contract that governs the relationship between a franchisor and a franchisee in South Korea. It outlines the rights and obligations of both parties, including brand usage, training, support, fees, duration, renewal terms, and dispute resolution.
The agreement must comply with Korea’s Fair Transactions in Franchise Business Act, which protects franchisees from unfair practices and promotes transparency in the market.
Key Legal Considerations for Foreign Franchisors
1. Mandatory Disclosure Requirement
Before any agreement is signed, franchisors must register their disclosure document with the Korea Fair Trade Commission (KFTC). This document includes detailed information about the franchise system, financials, litigation history, and support structure.
Failing to provide this document or offering misleading information can result in penalties, including nullification of the contract or fines.
2. Unfair Contract Terms Are Invalid
South Korean courts will strike down contract clauses that are overly one-sided, unforeseeable, or that unduly restrict a franchisee’s rights. Common red flags include:
- Excessive penalties for breach
- Unilateral termination rights for the franchisor
- Indemnity clauses that unfairly shield the franchisor
3. Language and Translation
While contracts can be drafted in English, the Korean version will generally prevail in court. It’s best practice to provide a high-quality bilingual version and ensure the Korean translation accurately reflects the original intent.
4. Jurisdiction and Governing Law
Korean courts often assert jurisdiction over franchise disputes occurring within Korea, especially if the franchisee is a Korean business. It’s crucial to work with local counsel to ensure jurisdiction clauses are enforceable.
5. Renewal and Termination Procedures
The Fair Transactions Act imposes specific procedures for non-renewal or termination. Franchisors must give advance notice and valid reasons. Sudden or unfair termination can lead to legal liability.
6. Local Adaptation
A successful franchise agreement in Korea should reflect local market norms. This includes adjusting fees, training support, and performance benchmarks to Korean business expectations.
Expert Insight by Michael Park, Esq.
With over 10 years of in-house counsel experience at SPC Group, Michael is a veteran of Korea’s franchise industry. He has led and managed major franchise operations for brands like Shake Shack Korea, Dunkin’ Donuts, and Baskin Robbins, giving him unmatched insight into the legal and operational realities of franchising in Korea. When it comes to the Korean Franchise Disclosure Document, few understand the system better.
Final Thoughts: Legal Advice Is Essential
Entering the Korean market is exciting—but it requires careful planning. A well-drafted, compliant Korean franchise agreement can protect your brand, reduce legal risks, and set the foundation for long-term success.
Partnering with local legal professionals who understand both Korean law and international franchising is essential.
Let us help.
If you have questions or need tailored legal guidance on your Korean franchise agreement, contact us at ask@pureumlawoffice.com. We’re here to help you navigate the Korean market with confidence.
