Myungryundang, the franchisor behind the Myungryun Jinsa Galbi barbecue chain, lent hundreds of billions of won at low interest to consumer finance firms owned by its chairman's family, and those firms in turn charged franchisees interest of up to 18% a year, South Korea's antitrust regulator said. The Fair Trade Commission concluded that the arrangement handed the family-owned lenders about 21.7 billion won in economic benefit and said it will refer Myungryundang and Chairman Lee Jong-keun to prosecutors.
The FTC said on the 28th that it imposed a corrective order and a fine of 10.472 billion won on Myungryundang for unfair support. It also fined the company 4.4 billion won for violating the Franchise Business Act by failing to properly disclose the lending structure to prospective franchisees. The total penalty comes to about 14.8 billion won.
Myungryundang initially provided startup funds to franchisees directly and without interest. From late 2021, however, it began setting up consumer finance firms in which Lee and his relatives held most of the shares, and started lending to franchisees and prospective franchisees through them. Fourteen such firms were created.
Between December 2021 and April this year, Myungryundang lent a cumulative 298.3 billion won to those firms at annual rates of either 2.3% or 4.6%. The FTC calculated a normal funding rate of 8.73% to 13% a year, based on data from 27 financial companies including banks, savings banks and capital firms.
Under normal terms the lenders would have paid about 31.6 billion won in interest, but they actually paid only about 9.9 billion won. The FTC treated the difference of about 21.7 billion won as the amount of support Myungryundang provided to the chairman's family lenders.
The lenders, meanwhile, charged 12% a year on funds for renovating existing stores and 15% on new startup loans. Rates on some new loans rose to as high as 18% a year after the end of 2024. Money supplied by Myungryundang at 2.3% to 4.6% was thus passed on to franchise stores as loans carrying rates of up to 18%. The FTC said, however, that it was not ruling the 12% to 18% lending rates themselves illegal.
Myungryundang also absorbed much of the default risk that should have fallen on the lenders. It signed subrogation agreements under which it would repay the principal if a franchisee failed to pay. Myungryundang employees handled the practical work from loan consultations through contract signing. Franchisees who took out loans repaid them by paying principal and interest on top of the package price when they bought meat supplies, and Myungryundang settled the amounts monthly and passed them on to the lenders.
Many of the lenders had no dedicated on-site staff, or as few as one employee including the chief executive. Some had rented shared-office space of little more than three square meters to register as a lending business. Even so, each firm could draw on 10 billion to 15 billion won in funding from Myungryundang.
The FTC also took issue with the decision to split the operation into 14 separate firms. Consumer finance companies with assets above 10 billion won must register with the Financial Services Commission and face total-asset regulations, and the regulator concluded that Myungryundang set up the companies piecemeal to keep each one's assets below that threshold and avoid the rules.
Prospective franchisees were not properly told about the structure either. While guiding and arranging startup loans, Myungryundang wrote "not applicable" in the section of its information disclosure statement covering the provision and arrangement of credit. The investigation also found that it did not adequately disclose that the lenders were owned by the chairman's family, or the loan terms and repayment methods.
Backed by that support, the combined outstanding loan assets of the 14 firms in 2025 grew large enough to rank 27th among 8,203 consumer finance companies nationwide. Citing the scale of the support and Lee's direct involvement in setting up the firms, deciding interest rates and designing the business structure, the FTC decided to refer both the company and the chairman to prosecutors.
The lending structure has since been effectively halted. According to the FTC, the rate applied to franchisees was cut to 4.6% a year after December last year, and the 14 lenders have stopped making new loans and are managing only their existing loan assets.
An FTC official said the commission "plans to continue monitoring and take strict action against franchisors that provide false information on matters important to prospective franchisees' decisions, or that hide or understate such information."
