The FTC penalized Kingyo International Co. on December 11, 2013 for failing to fully disclose important franchise information in writing to its potential franchisees before the parties entered into a franchise relationship. The important franchise information which would be of concern to a business operator and be relied on when making business decisions of whether to enter the franchise but had not been disclosed by Kingyo includes:
- expenses before and during operation;
- statistics concerning the percentage of cancellation and termination of franchise agreements in the same franchise system in the previous year;
- capital equipment, specifications for renovation construction, and list of contractors;
- items and quantities of products or raw materials to be purchased; and
- standards for imposing penalties.
Failure to disclose such information will result in inaccurate decision-making by franchisees, and should constitute unfair practices sufficient to affect the state of the franchising industry. The FTC found Kingyo to have violated Article 24 of the Fair Trade Act, and imposed an administrative fine of NT$500,000.
