hankyoreh

a Korea Express franchisee

By Heo Jae-hyun, staff reporter

The “underdogs” railed against abuses by large corporations at the National Assembly on May 7. The testimony event brought forth examples of unfair practices and exploitation by big businesses. Car dealers, bakery franchise operators, truck drivers, and workers from department store branches filled the halls with stories of hardship. They all said that the most distressing part of their situation is that their cries go unheard by society at large.

It was only recently that Mr. Kim realized that the unfair transaction practices by GM Korea (former GM Daewoo) were an example of the “tyranny of the top tier.” The 53-year-old, who has run a dealership selling GM cars for 17 years (ever since the company was known as Daewoo Motors), made up his mind then and there to fight.

He and other dealership owners said GM head office set monthly sales quotas. The targets are set by calculating the dealership’s sales from the previous month and adding as many as ten more on top of it. If the dealers fail to meet them, they may lose some of their subsidy - or, in serious cases, have their contract voided.

GM Korea also asserts the power to conduct searches on its dealers. Article 27, Item 1 of its dealership contract states that the vendor “may demand to read . . . dealer ledgers, sales statements, and other sales documents in order to verify whether the dealer if faithful executing all of his/her contractual obligations.” It also says the dealership “must willingly cooperate with any examination.”

The National GM Korea Dealership Development Association filed for remedial measures with the Fair Trade Commission, submitting an “unfair trade practice report”, calling the terms improper.

Yu Je-man, the operator of a Crown Bakery franchise in Cheonan since 2003, voiced suspicions about the parent company’s intentions.

“Never mind helping us run our franchises,” Yu said. “I think they’re making the rules so that it’s even harder to make sales.”

According to his account at the May 7 testimony event, Crown Bakery sent a notice to its franchises last month telling them to order cakes at noon instead of 10 pm.

It was an incomprehensible request. Evening was when most sales were made. Cakes generally sell best between 5 and 10 pm; after that, the store checks its inventory and orders cakes to sell the next day.

The parent company said the change was “unavoidable,” explaining that production for cakes had been outsourced because of an accumulated deficit. Even if the explanation did make any sense, it would also mean the cost for any surplus cakes ordered would fall squarely on the franchise operators.

Yu also claimed Crown Bakery was trying to get out of the business altogether. “They’re losing out in the competition with other bakery companies,” he explained. “The officials at the head offices are going around telling the franchise owners to close down, saying the company’s going to shut down soon.”

“Who’s going to pay us back the money we invested when we opened the franchise?” an indignant Yu asked.

The Namyang Dairy franchise owner was livid. A statement arrived at the National Assembly on May 7 from Kim, the operator of a Seobu Cheese franchise who recently released the recording of a phone call three years ago in which an employee on the company’s sales staff used abusive language while demanding that the store stock more of its products. The statement, read aloud by Namyang Dairy Franchise Associate head Lee Chang-seop, included references to “death” and “murder.”

Kim, who said he opened the franchise on June 1, 2000, after paying 30 million won (US$27,500) for the business rights, claimed that he had “lost my pride, my patience, and may last bit of hope over the past eleven years.”

“I have thought of death several times over those eleven years, and a few times I’ve considered murder,” he wrote. “I suffered curse words and threats the likes of which I’d never heard before from a sales officer young enough to be my son, and I’ve had to swallow my tears.”

Kim also alleged extortion.

“In 2009, a sales representative named Lee demanded 3 million won (US$2,750) in cash as a so-called ‘rebate,’” he wrote. “On May 31, 2000, a representative named Park asked for 2 million won (US$1,830) in the name of ‘franchise opening costs.’”

“Namyang Dairy isn’t a company to be improved,” he continued. “It should go away forever.”

Rep. Lee Jong-kul, of the Democratic United Party, who organized the testimony event, urged the National Assembly to pass an amendment to the Franchise Business Act to protect the rights of franchise operators.

“Many of these people are small business operators who got started because of false advertising, which was used by the parent company to drum up profits. Now they’re living a fate worse than death,” Lee said.

“Even when they report the abuses to the FTC, the situation is rarely improved,” he added.

Please direct questions or comments to [english@hani.co.kr]