NextFin News - The Korea Fair Trade Commission (KFTC) has levied a 967 million won ($725,000) fine against Shinjeon Foods System, the operator of the popular "Shinjeon Tteokbokki" franchise, for systematically coercing its partners into purchasing generic supplies at inflated prices. The ruling, announced on March 22, 2026, marks a significant escalation in the regulator’s crackdown on "Gap-Eul" (power imbalance) abuses within the country’s competitive food service sector. By forcing franchisees to buy non-essential items like disposable chopsticks and plastic cups directly from the head office, Shinjeon extracted at least 630 million won in unjust profits over a nearly three-year period.
The investigation revealed a sophisticated enforcement mechanism designed to squeeze margins from small business owners. Between March 2021 and June 2023, Shinjeon dispatched 70 formal warnings to 59 franchisees, threatening contract termination and legal damages if they continued to source generic items independently. These items—ranging from 350cc cups to triangular containers—were not essential to maintaining the brand’s specific flavor or identity, yet the company applied markups as high as 34.7%. To ensure compliance, the franchisor established a "monitoring-to-reporting" pipeline across seven regional headquarters, effectively treating independent procurement as a breach of contract.
This case highlights a recurring friction point in the South Korean franchise model, where head offices often rely on supply-chain margins rather than royalty fees for revenue. Shinjeon’s attempt to retroactively legitimize these forced purchases further soured the regulator's view. In September 2023, the company revised its disclosure documents to list packaging materials as mandatory transaction items. However, once the KFTC launched an on-site probe in October, the company abruptly reclassified them as "recommended" items in an apparent bid to evade scrutiny. The KFTC dismissed these maneuvers, noting that the coercive nature of the relationship remained unchanged regardless of the paperwork.
The penalty arrives as U.S. President Trump’s administration continues to monitor global trade and competition standards, though the KFTC’s focus remains domestic: protecting the livelihoods of small-scale entrepreneurs. For the broader industry, the Shinjeon ruling serves as a stark warning that the definition of "essential items" is narrowing. Regulators are increasingly skeptical of franchisors who claim that generic disposables are critical to brand consistency. As the KFTC moves toward more aggressive monitoring in 2026, the era of using "forced purchases" as a hidden tax on franchisees appears to be reaching a costly dead end.
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