Pizza Hut under FTC investigation for franchise manual changes

South Korea’s Fair Trade Commission has begun an investigation into Pizza Hut Korea for alleged unfair changes to its contracts with its franchisees, according to news reports Thursday.

Franchisees of Pizza Hut are claiming that the company in May unilaterally changed its manual governing contracts with its franchisees, putting additional cost burdens on them and reserving the right to void contracts if they did not follow these guidelines. 

Although the watchdog does not comment on ongoing investigations, an official said confirmed that the agency is “looking into” the franchise contracts.

Pizza Hut Korea could not be reached for comment.

This is not the first time that Pizza Hut has come under fire for its treatment of its franchisees. In January this year, the company was fined 526 million won ($456,400) by the FTC for creating and collecting so-called “administration fees” from franchise owners.

News of the investigation follows a similar probe into the fried chicken franchise BBQ, as the government is moving to strengthen regulations over unfair franchise contracts under the new Moon Jae-in administration. 

In the first half of 2017, the FTC took 15 investigative and punitive measures for unfair business practices regarding franchises, compared to just four such measures last year.

By Won Ho-jung (hjwon@heraldcorp.com)