A pedestrian walks by a Domino's Pizza's restaurant in Seoul, Aug. 12. Newsis
By Kim Jae-heun
Domino's Pizza Korea's franchise headquarters was fined by the Fair Trade Commission (FTC) for ordering restaurant owners to renovate their stores' interiors and not contributing to the costs as required by law, according to the country's antitrust agency Thursday.
Cheong-O DPK Chairman O Gwang-hyeon
The FTC imposed a 700 million won fine ($522,778) on Cheong-O DPK, the local franchise operator of Domino's Pizza Korea, and ordered it to correct its business practices. Cheong-O DPK also has to pay 1.52 billion won in allotment payments to its franchisees.
From October 2014 to July 2021, Cheong-O DPK ordered 70 of its franchisees to renovate their stores. The decision came as Domino's Pizza's U.S. headquarters pushed for the implementation of a theater-themed interior design concept at its restaurants around the world, enabling customers to view the pizza manufacturing process through open kitchens. However, Cheong-O DPK did not pay the required 1.52 billion won out of the total costs of 5.13 billion won to its 70 franchised restaurants in Korea to carry out the intended renovations.
According to the local Franchise Business Act, the franchise operator has to pay restaurant owners 40 percent of the total costs for interior design work when expanding or relocating stores, and 20 percent for other construction work.
The FTC also said Cheong-O DPK was not acting in the spirit of the law by making it look like the restaurant owners had undergone construction on their own so as to avoid paying its share of the expenses. Franchise operators here do not have to pay a share of the costs of improving a store's interior if the franchisees choose to do so voluntarily.
"Even though franchisees carried out construction work for their stores' interiors due to the order from headquarters, the company passed on all the costs to the franchisees. It is meaningful that our sanction against Cheong-O DPK raised the alarm concerning this unfair practice," an FTC official said.
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