Franchise Difficulties

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Small-scale vendors operating franchise stores are struggling with stiff demands from headquarters. The chain stores take on more products than they are able to sell, and at times must accept the losses due to cutthroat competition. Take a look.

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This is a text message sent to a franchise store owner by a sales employee at the head office of a famous bakery chain. The employee said he put in more orders for the store without permission because he needed to meet his quota, and that he was sorry.

[Soundbite] (Franchise Store Owner (Voice Modified)) : "I said I don't need this, take this order back. The employee would then apologize saying the order is already in, so I have no choice but to make that purchase."

But the head office argued such unilateral demand is impossible because the system of completing orders requires consent of the franchise store owner. But according to the sales employee, it has been the customary practice to hand over a large volume of goods to individual stores during holiday or special event seasons while the stores returned the goods later if they didn't manage to sell them.

[Soundbite] (Former Sales Employee (Voice Modified)) : "Store owners need to give consent to put through their own orders so they bite the bullet and also agree to orders put in by the sales employee."

This is not all. Store owners struggle with other survival issues. This bakery was a Paris Baguette chain for 8 years before switching over to rival franchise Tous Les Jours last year. This was because a new Paris Baguette set up by the head office just opened across the street. A number of bakeries battle it out in the same commercial area where demand is limited. Franchise owners bear the brunt of this fierce competition.

[Soundbite] (Franchise Store Owner) : "I know all too well the production cost of sliced bread. It's about 1,600-1,700 won. But a rival store sells it at 1,000 won which is a loss to its profit."

Bakeries of the same franchise can open within close range, with no restrictions in regards to distance. This has recklessly increased numbers of the same chain while store owners inevitably switch over to rival brands, creating a vicious cycle. Urgent measures are necessary to protect small-scale businesspeople amid the heated competition with their own company headquarters, such as strengthening their collective bargaining rights.