People walk by a Paik's Coffee store, a franchise café of Theborn Korea, in Seoul, May 28. Newsis

Concerns are mounting over celebrity CEO Paik Jong-won's ability to successfully list his restaurant franchise as a dispute continues between Theborn Korea and several franchisees of the company's Yeondon Ball Katsu brand.

According to industry sources, Tuesday, the Korea Exchange (KRX) is examining claims made by eight Yeondon Ball Katsu franchisees during a preliminary review process for Theborn Korea's listing.

The KRX is known to place significant importance on qualitative evaluation criteria before making a listing decision. This includes considering past and ongoing lawsuits and disputes, as significant legal issues could disrupt smooth business operations.

The examination came as franchise owners of Yeondon Ball Katsu, Theborn Korea's take-away "tonkatsu" (breaded, deep-fried pork cutlet) brand, filed a suit with the Fair Trade Commission on June 18. They claimed that the headquarters had promised monthly sales of around 30 million won and a profit margin of 20-25 percent, but actual sales amounted to only 15 million won, with a profit margin of 7-8 percent.

Their protest came weeks after Theborn Korea submitted a preliminary review application to the KRX before listing. Theborn Korea asserts that it never promised specific sales or profit margins.

However, continued complaints from its franchisees are seen as a potential obstacle to Theborn Korea's listing, according to market watchers.

Franchisees of Yeondon Ball Katsu and members of the Korea Franchisee Union stage a protest against Theborn Korea in front of the company's office in Seoul, June 18. Yonhap

"It is inappropriate to pursue a listing while dealing with issues like those seen in the Yeondon Ball Katsu case," said Jeong Jong-ryul, chief counsel of the Korea Franchisee Union. "While it is beneficial for the company to grow and expand its business through listing, it should resolve these problems properly and work toward mutual success with the franchisees."

The preliminary period for a public listing lasts 45 business days, meaning that Theborn Korea's review process will continue until the end of this month.

As of Tuesday, the KRX reportedly did not find it necessary to extend this period.

However, market observers believe that if franchisees from other brands also raise significant concerns about Theborn Korea's business practices, it could be considered a serious issue under the qualitative review criteria. In such cases, if additional verification is needed to address conflicts with Yeondon Ball Katsu franchisees, the review period is likely to be extended.

Theborn Korea refrained from making extensive comments about the listing process.

"We are currently waiting for the results of the preliminary review application and are steadily continuing our preparations," it said.

Theborn Korea initially pursued a listing in 2018 but postponed it due to the COVID-19 outbreak. This year, the company resumed its listing process following record revenues. Last year, Theborn Korea saw revenues surge 45.5 percent year-on-year to 410.7 billion won. Paik is the largest shareholder of Theborn Korea with a 76.99 percent stake.