China

Franchise regulation

There are specific franchising regulations and general laws that affect franchisors.

Pre-contractual disclosure requirements

Franchisors must provide extensive prescribed information to franchisees at least 30 days before signing a franchise agreement.

Registration

Franchisors are required to register with the Ministry of Commerce within 15 days of entering into the first franchise agreement in China.

Franchisors must meet certain requirements to operate a franchise, including:

• owning and operating at least 2 stores in/outside China for at least 1 year;
• owning or having the right to use resources such as trade marks;
• being able to provide long term operartional guidance and training support to franchisees; and
• must be of good repute, with no record of fraudulent activities.

Other issues

Some mandatory clauses are required to be included in franchise agreements, such as: the content and method of providing business guidance and support, quality requirements for the goods/services, cooling-off period and consumer rights protection and acceptance of responsibility to provide indemnity etc.

All documents are to be filed with the Ministry of Commerce and must be translated into Chinese (if in a foreign language).

Documents/certificates that are formed in a foreign country must be notarised and legalised if executed outside China.

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Contact Sven Michael Werner - Svenmichael.Werner@twobirds.com or Grace Zhao - Grace.Zhao@twobirds.com