Gyeonggi Province Seeks Reasonable Solutions to Excessive Brand Overlap in Online Delivery Market

[Suwon Ilbo=Park No-hun Reporter] According to a Gyeonggi Province investigation, when ordering chicken or pizza through delivery apps, franchise locations of the same brand are being exposed up to 18 times in duplicate.

In particular, duplicate exposure of mid-to-large chicken franchise brands exceeds 60%, with franchise owners setting delivery service areas on delivery apps at 2.5 times wider than actual average delivery distances, raising concerns about business area encroachment disputes.

Kim Ji-ye, head of Gyeonggi Province's Fair Trade Bureau, announced the results of a "Survey on Overlapping Online Delivery Service Areas" on the 23rd, stating, "There are growing concerns that conflicts between 'franchise owners and franchise owners' and 'headquarters and franchise owners' over online platform service areas will rapidly increase. We will establish mutually beneficial and fair economic structures that work rationally and equitably for franchise headquarters, franchise owners, online platform companies, and consumers."

The investigation was conducted over approximately one month from January 11 to February 10, with one location selected in each of 10 municipalities in the province, including Suwon, Siheung, and Namyangju.
Data from 5,700 franchise locations exposed when ordering chicken and pizza through 3 major domestic delivery apps were collected from the survey points, with analysis conducted on (1) franchise duplicate exposure and (2) delivery ranges.

As a result, the average number of locations exposed at one survey point was 267 for chicken and 153 for pizza, with franchise ratios of 63.2% for chicken and 50.2% for pizza.

Looking at detailed survey results, among 30 surveyed locations where multiple franchise locations of the same brand appeared on delivery apps—the duplicate rate—chicken businesses showed an average of 40.5%, with some brands showing up to 18 duplicate exposures.

The duplicate rate for pizza businesses averaged 23%, relatively lower in terms of online service area overlap compared to chicken businesses.

Second, based on analysis of delivery ranges shown on delivery apps, while the actual average delivery distance is 1.5km, the delivery service areas set by owners through advertising such as flag marking averaged 3.75km (2.5 times), according to the investigation.

Both chicken and pizza businesses had cases where delivery distances were set up to 12km maximum. Since consumers typically order within 2km, such delivery competition can lead to excessive advertising expenditure and disputes over business area encroachment between other franchise locations.

When consumers order from a higher-ranked location despite closer outlets being available, it results in consumer inconvenience due to higher delivery fees and longer delivery times.

Current franchise law includes mandatory provisions preventing franchise headquarters from opening additional franchise or directly operated locations within the service areas specified in franchise agreements, but there are no standards for online service areas.

In reality, unlimited competition and market saturation of the same brand are occurring online.

The Gyeonggi Province Fair Trade Support Center has been continuously receiving consultations and dispute resolution requests related to delivery and sales area conflicts between headquarters-owners and owner-owners in the online market since last year.

An example of 'headquarters-owner' disputes on online platforms involves a cosmetics brand's direct-operated store on open markets appearing as the "'00 Cosmetics Official Sales Mall" with higher exposure while selling products at discounted prices lower than those of the same brand's distributors, causing a sharp decline in distributor sales.

An example of 'owner-owner' disputes involves a nearby Franchise B location expanding its delivery service area beyond Franchise A's business territory by using flag marking on delivery apps, ultimately causing Franchise A's sales to decline by over 30%.

The province plans to hold forums to gather industry and academic opinions and explore institutional improvement measures for public discussion on 'online service areas.'

Additionally, the province operates a reporting center for franchise business area disputes and unfair practices, accepting reports on an ongoing basis and actively assisting with legal counseling, dispute resolution, and reporting to the Fair Trade Commission.