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Kim Sung-yong, CEO of Dongwon F&B. (Photo: Dongwon F&B) |
[Alpha Biz= Kim Jisun] Dongwon F&B, led by CEO Kim Sung-yong, has been sanctioned by the Korea Fair Trade Commission (KFTC) for imposing unfair compensation clauses on its franchisees when leased equipment, such as refrigerators, was damaged. The KFTC announced on December 22 that it has decided to issue corrective orders, including prohibition of the unfair practices and notification requirements.
From June 2016 to October 2025, Dongwon F&B leased equipment to its franchisees under agreements stipulating that if the equipment was damaged or lost due to the franchisee’s fault, the franchisee would be required to compensate the full purchase price without accounting for depreciation. This meant that even for older equipment whose value had naturally decreased over time, franchisees were forced to pay the cost of a new unit.
The company’s “overbearing” practices also extended to advertising and promotion support. Under contracts where franchisees received funding to display brand promotional materials, Dongwon F&B required full repayment of the support funds if equipment or advertising materials were damaged, without consideration of the elapsed advertising period. The clauses even stipulated that if damaged promotional materials were not repaired within 14 days, the franchisee would forfeit the full advertising support.
The KFTC determined that these practices constituted an abuse of superior bargaining power, causing disadvantage to the franchisees. However, the commission noted that there was no evidence that Dongwon F&B had actually enforced these clauses to claim compensation, and that the company voluntarily revised the problematic clauses after the investigation began. Therefore, the KFTC decided to impose corrective orders only, without any fines.
Alphabiz Reporter Kim Jisun(stockmk2020@alphabiz.co.kr)
