A Paris Baguette store in Seongnam's Pangyo, Gyeonggi Province / Courtesy of SPC

Major bakery franchise companies in Korea are still barred from opening up in local alleys where they would compete with smaller bakery shops for another five years, under a new set of mutual agreements between major companies and small and medium-sized enterprises (SMEs) in the bakery industry, according to Korea Commission for Corporate Partnership, a private business arbitrator group, Friday.

Market observers, however, speculate that the renewed agreements to be signed on Tuesday will again shackle bakery giants like Paris Baguette and Tous Les Jours from entering the alley commerce areas and making additional sales.

The new version of the legally non-binding agreement, according to the commission, will change certain existing terms in favor of the bakery giants. Within the country's capital region of Seoul, Incheon and Gyeonggi Province, the new agreements will reduce the minimum distance between a major franchise shop and an SME-run shop from 500 meters to 400 meters.

The new guidelines will also favor the major franchises by increasing the portion of new shops they can open in the capital region from 2 percent to 5 percent of the number of shops they ran the previous year.

Despite such changes, the new mutual agreements are still hurdles to the franchise companies. The companies have been arguing that since 2013 when the terms of mutual agreements were first introduced under the country's Act on the Promotion of Mutually Beneficial Cooperation Between Large Enterprises and Small and Medium Enterprise, the country's bakery market has changed drastically. Outlets for bread and pastry products have since diversified from bakery shops to coffee shops, convenience stores, hypermarket chains and online malls.

Amid such market growth, however, there haven't been any regulations keeping major companies clear of SMEs. This is why larger companies complained they were the only victims of the mutually agreed terms under the commission.

An official from SPC which runs Paris Baguette said he was at first doubtful whether reducing the minimum distance and increasing the number of new stores allowed for major franchise firms would be beneficial for the company.

"Now, we just don't want any trouble with those SMEs," the official said. "The coexistence of our franchisees and smaller shops in the country's bakery industry is also important to us."