Commercial Franchise Management Regulations

Chapter 1 General Provisions

Article 1 is to regulate commercial franchise activities and promote the healthy and orderly development of commercial franchises. To maintain market order, these regulations are formulated.

Article 2 Those engaged in commercial franchise activities within the territory of the People’s Republic of China must abide by these regulations.

Article 3 The term “commercial franchising” (hereinafter referred to as “franchising”) as mentioned in these Regulations refers to an enterprise (hereinafter referred to as “franchisor”) that owns registered trademarks, corporate logos, patents, proprietary technologies and other operating resources. The business resources it owns are licensed to other operators (hereinafter referred to as franchisees) in the form of contracts. The franchisees carry out operations under a unified business model in accordance with the contract and pay franchise fees to the franchisor.

Other units and individuals other than enterprises may not engage in franchise activities as franchisors.

Article 4 When engaging in franchise activities, the principles of voluntariness, fairness, honesty and credit shall be followed.

Article 5 The commerce department of the State Council shall, in accordance with the provisions of these Regulations, be responsible for the supervision and management of franchise activities nationwide. The commercial departments of the people's governments of provinces, autonomous regions, and municipalities directly under the Central Government and the commercial departments of the people's governments of districted cities are responsible for the supervision and management of franchise activities within their respective administrative regions in accordance with the provisions of these Regulations.

Article 6 Any unit or individual has the right to report any violation of these Regulations to the competent commercial department. After receiving the report, the commercial department shall promptly handle it in accordance with the law.

Chapter 2 Franchise Activities

Article 7 The franchisor shall have a mature business model when engaging in franchising activities, and shall have the ability to continuously provide business guidance, technical support and Ability to provide services such as business training.

To engage in franchising activities, the franchisor must have at least 2 directly-operated stores and have been operating for more than 1 year.

Article 8 The franchisor shall file a record with the competent commerce department in accordance with the provisions of these regulations within 15 days from the date of first entering into a franchise contract. Those who engage in franchise activities within the scope of a province, autonomous region, or municipality directly under the Central Government shall register with the competent commerce department of the people's government of the province, autonomous region, or municipality directly under the Central Government where they are located; those who engage in franchise activities across provinces, autonomous regions, or municipalities directly under the Central Government shall register with the competent commerce department of the State Council.

The franchisor shall submit the following documents and materials when filing with the competent commerce department:

(1) A copy of the business license or a copy of the enterprise registration (registration) certificate;

(2) Franchise contract sample;

(3) Franchise operation manual;

(4) Marketing plan;

(5) A written commitment and relevant supporting materials indicating that it complies with the provisions of Article 7 of these Regulations;

(6) Other documents and materials specified by the commerce department of the State Council.

If franchised products or services require approval according to law before they can be operated, the franchisor shall also submit relevant approval documents.

Article 9 The competent commercial department shall record the documents and materials submitted by the franchisor that comply with the provisions of Article 8 of these Regulations within 10 days from the date of receipt, and notify the franchisor. If the documents and information submitted by the franchisor are incomplete, the commercial department may require it to submit additional documents and information within 7 days.

Article 10 The competent commerce department shall publish the registered list of franchisors on the government website and update it in a timely manner.

Article 11 When engaging in franchise activities, the franchisor and the franchisee shall enter into a franchise contract in written form.

The franchise contract shall include the following main contents:

(1) Basic information of the franchisor and franchisee;

(2) Contents of the franchise , period;

(3) Type, amount and payment method of franchise fees;

(4) Specific content and provision of services such as business guidance, technical support and business training Method;

(5) Quality, standard requirements and guarantee measures of products or services;

(6) Promotion and advertising of products or services;

(7) Protection of consumer rights and interests in franchising and assumption of liability for compensation;

(8) Change, cancellation and termination of the franchise contract;

(9) Liability for breach of contract;

(10) Dispute resolution methods;

(11) Other matters agreed between the franchisor and the franchisee.

Article 12 The franchisor and the franchisee shall agree in the franchise contract that the franchisee may unilaterally terminate the contract within a certain period after the conclusion of the franchise contract.

Article 13 The franchise period agreed in the franchise contract shall be no less than 3 years. However, except with the consent of the franchisee.

When the franchisor and the franchisee renew the franchise contract, the provisions of the preceding paragraph shall not apply.

Article 14 The franchisor shall provide the franchisee with a franchise operation manual, and continue to provide business guidance, technical support, business training and other services to the franchisee in accordance with the agreed content and method.

Article 15 The quality and standards of franchised products or services shall comply with the requirements of laws, administrative regulations and relevant national regulations.

Article 16 If the franchisor requires the franchisee to pay a fee before entering into a franchise contract, it shall explain in writing to the franchisee the purpose of the fee and the conditions and methods of refund.

Article 17 The promotion and publicity fees collected by the franchisor from the franchisee shall be used in accordance with the purposes agreed in the contract. The use of promotion and publicity expenses shall be disclosed to the franchisee in a timely manner.

The franchisor shall not engage in deceptive or misleading behavior during promotion and publicity activities, and its advertisements shall not contain any content promoting the franchisee's income from franchising activities.

Article 18 Without the consent of the franchisor, the franchisee shall not transfer the franchise right to others.

The franchisee shall not disclose to others or allow others to use the franchisor’s trade secrets in his possession.

Article 19 The franchisor shall report to the competent commerce department in the first quarter of each year the status of the franchise contract concluded in the previous year.

Chapter 3 Information Disclosure

Article 20 The franchisor shall establish and implement a complete information disclosure system in accordance with the regulations of the commerce department of the State Council.

Article 21 The franchisor shall provide the franchisee with the information specified in Article 22 of these Regulations in writing at least 30 days before the date of conclusion of the franchise contract, and provide the franchise contract with the franchisee. text.

Article 22 The franchisor shall provide the franchisee with the following information:

(1) The franchisor’s name, address, legal representative, registered capital, and business scope And the basic information on engaging in franchise activities;

(2) The basic information on the franchisor’s registered trademark, corporate logo, patent, proprietary technology and business model;

(3) The type, amount and payment method of franchise fees (including whether to charge a deposit and the conditions and methods of return of the deposit);

(4) Prices and conditions for providing products, services and equipment to the franchisee;

(5) Continue to provide the franchisee with the specific content, provision methods and implementation plan of business guidance, technical support, business training and other services;

(6) To the franchisee Specific methods for guiding and supervising business activities;

(7) Franchise outlet investment budget;

(8) Number and distribution of existing franchisees in China Assessment of region and operating conditions;

(9) Summary of financial accounting reports and audit reports audited by an accounting firm in the past two years;

(10) Relationship with the franchise in the past five years Litigation and arbitration related to operations;

(11) Whether the franchisor and its legal representative have any major illegal business records;

(12) Regulations stipulated by the commerce department of the State Council Other information.

Article 23 The information provided by the franchisor to the franchisee shall be true, accurate and complete, and shall not conceal relevant information or provide false information.

If the information provided by the franchisor to the franchisee changes significantly, the franchisor shall promptly notify the franchisee.

If the franchisor conceals relevant information or provides false information, the franchisee may terminate the franchise contract.

Chapter 4 Legal Responsibilities

Article 24 If the franchisor does not meet the conditions specified in paragraph 2 of Article 7 of these Regulations and engages in franchise activities, the competent commerce department shall Order corrections, confiscate illegal gains, impose a fine of not less than 100,000 yuan but not more than 500,000 yuan, and make an announcement.

If other units or individuals other than enterprises engage in franchise activities as franchisors, the competent commerce department shall order them to stop illegal business activities, confiscate illegal gains, and impose a fine of not less than 100,000 yuan but not more than 500,000 yuan.

Article 25 If the franchisor fails to register with the competent commerce department in accordance with the provisions of Article 8 of these Regulations, the competent commerce department shall order the franchisor to register within a time limit and impose a fine of not less than 10,000 yuan but not more than 50,000 yuan; If the registration is still not filed within the time limit, a fine of not less than 50,000 yuan but not more than 100,000 yuan will be imposed and an announcement will be made.

Article 26 If the franchisor violates the provisions of Articles 16 and 19 of these Regulations, the competent commercial department shall order him to make corrections and may impose a fine of not more than 10,000 yuan; if the circumstances are serious, he shall be fined Fines ranging from RMB 10,000 to RMB 50,000 shall be announced.

Article 27 If the franchisor violates the second paragraph of Article 17 of these Regulations, the industrial and commercial administrative department shall order it to make corrections and impose a fine of not less than 30,000 yuan but not more than 100,000 yuan; if the circumstances are serious, , impose a fine of not less than 100,000 yuan but not more than 300,000 yuan, and make an announcement; if a crime is constituted, criminal liability will be pursued in accordance with the law.

If the franchisor uses advertisements to deceive or mislead, he shall be punished in accordance with the relevant provisions of the Advertising Law.

Article 28 If the franchisor violates the provisions of Articles 21 and 23 of these Regulations and the franchisee reports it to the competent commercial department and it is verified, the competent commercial department shall order him to make corrections. A fine of not less than RMB 10,000 but not more than RMB 50,000 shall be imposed; if the circumstances are serious, a fine of not less than RMB 50,000 but not more than RMB 100,000 shall be imposed and an announcement shall be made.

Article 29: Anyone who defrauds others of property in the name of franchising, which constitutes a crime, shall be investigated for criminal responsibility in accordance with the law; if it does not constitute a crime, he shall be punished by the public security organs in accordance with the "Public Security Administration of the People's Republic of China and the State" shall be punished in accordance with the provisions of the Law.

Anyone who engages in pyramid schemes in the name of franchise shall be punished in accordance with the relevant provisions of the "Regulations on Prohibition of Pyramid Schemes".

Article 30 If a staff member of the competent commerce department abuses his or her power, neglects his duties, engages in malpractice for personal gain, and constitutes a crime, he shall be investigated for criminal responsibility in accordance with the law; if it does not constitute a crime, he shall be punished in accordance with the law.

Chapter 5 Supplementary Provisions

Article 31 Franchise activities involving trademark licensing or patent licensing shall be handled in accordance with the provisions of laws and administrative regulations related to trademarks and patents.

Article 32: Relevant associations, under the guidance of the commerce department of the State Council, shall formulate regulations for franchise activities in accordance with the provisions of these Regulations, strengthen industry self-discipline, and provide relevant services to parties involved in franchise activities.

Article 33 Franchisors who have already engaged in franchise activities before the implementation of these Regulations shall file a record with the competent commerce department in accordance with the provisions of these Regulations within one year from the date of implementation of these Regulations; any failure to file after the expiration date shall , shall be punished in accordance with the provisions of Article 25 of these Regulations.

The provisions of Paragraph 2 of Article 7 of these Regulations shall not apply to the franchisor specified in the preceding paragraph.

Article 34 These Regulations shall come into effect on May 1, 2007.

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Postscript

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Important key points in the regulations have been marked in bold red.

To sum up, it can be seen that there are quite a lot of so-called franchises in the market that do not have basic franchise qualifications.

More often, they provide false information to mislead and exaggerate business performance, just for the purpose of making money.

Many franchise owners themselves do not have the ability to continue operating, and franchise investment is the main source of profit.

Logically speaking, if the franchise owner's own store is profitable, there may be opportunities for franchisees to make profits, but more often than not, the store itself is not profitable, so how can it be possible for franchisees to make profits?

However, the replication of profitability is a very professional science, and it is not an ability that just a small store can master.

Here are some suggestions for investors who want to join the franchise:

1. First ask the headquarters for the specific information of the franchisee, including the address, phone number and profitability. If you cannot tell the truth, there will be a problem. .

2. One sentence from the mouth of a franchisee is worth a hundred words from the headquarters when recruiting investment, but be careful whether this so-called "franchise" is a shill for the headquarters.

3. Be sure to carefully read the [Franchise Management Regulations] of the Ministry of Commerce and write anything that is guaranteed to you into the franchise contract.