Baedal Minjok (Baemin) has put its franchise partnership model introduced this month, Baemin Only, under scrutiny over fairness. The Cheogajip Yangnyeom Chicken franchisee association reported Baemin operator Woowa Brothers and Cheogajip franchisor Korea 153 to the Fair Trade Commission on allegations of unfair trade. Whether Baemin continues its exclusive franchise partnership strategy is expected to depend on the regulator’s decision.

Franchisees report Baemin Only to regulator, sparking fairness dispute

The Cheogajip Yangnyeom Chicken franchisee association reported Woowa Brothers and Korea 153 to the Fair Trade Commission on Feb. 20 on allegations of unfair trade. It said Baemin promised lower fees and discount support on the condition that franchisees trade exclusively with Baemin, but the economic benefits actually received by store owners are minimal. It also claimed franchisees lose opportunities to do business with other delivery apps, causing a serious hit from declining sales.

Woowa Brothers and Korea 153 signed a memorandum of understanding last month for strategic cooperation. After that, Baemin Only began on Feb. 9 as a promotion that lowers brokerage fees to 3.5 percent from 7.8 percent for franchisees that do not use platforms other than Baemin. The industry said about 1,100 stores, or 90 percent of roughly 1,200 Cheogajip Yangnyeom Chicken franchise outlets, joined on the first day.

But on Feb. 20, some Cheogajip Yangnyeom Chicken franchisees raised issues with the Baemin Only promotion, calling it an unfair trade practice. Law firm YK, representing the franchisee association, said the MOU amounts to unfair trade practices including abuse of market dominance, exclusive dealing and deceptive fee settlement methods.

Woowa Brothers is maintaining its position that Baemin Only is a mutually beneficial promotion that complies with relevant laws. Baemin rebutted the franchisee association’s statement on Feb. 20 that the discount rate said to be borne by Baemin was inflated and that franchisees’ management autonomy was being infringed. It also issued an additional statement on Feb. 24, stepping up its defence.

Woowa Brothers said on the day, "Baedal Minjok and Korea 153 are carrying out a mutually beneficial promotion to increase franchisees’ profits and expand customer benefits, and we are thoroughly complying with relevant laws."

The company explained it is concentrating benefits on franchisees, including lower brokerage usage fees and discount support from the franchisor and the delivery platform. It stressed franchisees can choose whether to participate voluntarily, and can switch to non-participation at any time even after joining.

It also said it is impossible to exert coercive power over the franchisor regarding claims that a specific platform is using a superior position amid intense competition in the delivery platform market. The company said there are no restrictive conditions on using public delivery apps, including Ttangyeoyo.

Baemin calls exclusive tie-ups a common competitive practice, hinting at expansion

With Woowa Brothers issuing this stance, the possibility was also raised that the Baemin Only promotion could be expanded to other franchises.

Woowa Brothers argues this type of promotion is already a competition method that has become common in the industry, across franchises and non-franchises. It has also pointed out that competitors are running similar promotions with multiple business owners.

Exclusive-condition promotions that contract exclusively with a specific delivery platform, like Baemin Only, have already been carried out in many cases overseas, including in the United States.

DoorDash, the top U.S. delivery app platform, signed an exclusive contract in 2018 with restaurant chain The Cheesecake Factory, which operates more than 200 stores in the United States. From last year, it signed an exclusive contract with 24-hour franchise Waffle House under which only DoorDash can deliver during late-night hours. Uber Eats has also pursued exclusive-condition contracts outside the United States, including an exclusive partnership with franchise Eggslut in Britain in 2024.

The industry views Baemin as having no choice but to maintain the Baemin Only strategy to widen its gap with Coupang Eats. South Korea’s delivery platform sector is seeing Coupang Eats closely chase Baemin, the market-share leader.

Wiseapp.Retail said that as of December last year, Baemin and Coupang Eats recorded 22,540,000 and 12,420,000 monthly active users, respectively. Compared with January last year, the gap in monthly active users between the two platforms narrowed by 17.6 percent. In Seoul in particular, Coupang Eats was reported to rank first by transaction value and user numbers.

As conflict among franchisees has led to a filing with the Fair Trade Commission, whether Baemin expands its Baemin Only strategy is expected to depend on the regulator’s decision. Key issues include whether the structure that induces exclusive trading amounts to unfair trade, and whether the franchisor effectively required franchisees to trade on a specific platform.

A Baedal Minjok official said, "A mutually beneficial promotion is an activity for a platform to attract partners by strengthening benefits," adding, "Participation is chosen voluntarily by franchisees. Even after joining, it is possible to switch to a non-participating Baemin Only store at any time."