Rohatyn rapped for exploiting BHC franchisees
U.S.-based investment management company The Rohatyn Group (TRG) which holds the largest stake in BHC, is facing criticism from franchisees of Korea’s No. 2 fried chicken franchise.
Over 780 franchised restaurant owners, who began an organization Wednesday to protest unfair practices of the foreign company and the franchise headquarters, also urged the Fair Trade Commission (FTC) to reinvestigate the allegations of BHC unfairly pricing its ingredients, such as sunflower oil and raw chicken.
“They have ostensibly emphasized mutual growth with their franchisees, but the headquarters has only sought profits for itself,” BHC Ulsan Ok-dong store owner Jin Jeong-ho, head of the franchisees’ organization, said at a press conference in front of the National Assembly that day.
“As a result, the franchise head- quarters have achieved rapid growth in a short period of time, but we have faced heavier workloads and empty wallets.”
According to BHC’s regulatory fil- ing, the company’s operating profit last year was 44 billion won ($40 million) larger than Kyochon F&B, the country’s No. 1 chicken franchise, although BHC posted 80 billion won less sales than Kyochon.
The organization, however, claimed TRG and BHC did not share their profits with the franchised restaurant owners at all.
Instead, the global private equity firm paid 84 billion won in dividends and reduced its investments in the chicken franchise, even though TRG Korea managing director Gordon Cho said his company would reinvest in BHC if it makes a profit.
“The foreign private equity firm holding the entire stake in BHC and several executives of the chicken franchise are focusing on a plan to sell BHC for a high price,” Jin said. “They will be able to earn a lot of money, but we will suffer losses.”
The franchisees demanded the headquarters come up with measures to compensate for damages to franchisees, in case of the sell-off.
In addition, the franchisees held another press conference in front of the FTC’s Gwacheon office in Gyeonggi Province on the same day to ask the FTC to reinvestigate the franchise headquarters, since the nation’s antitrust watchdog said the company’s pricing policy does not go against the law.
Last week, BHC was fined only 148 million won for not giving enough money to its franchisees for renovations and belatedly informing its franchisees of its spending on ads.
BHC headquarters denied the franchisees’ arguments, although the company said it welcomes the start of their organization.