Our China franchise lawyer summarized the main points of China franchise law. We have Shanghai franchise lawyer, Beijing franchise lawyer, Chongqing franchise lawyer and Tianjin franchise lawyer ready for your consultation. We also attached a full text of China Franchise law for your reference.
Implementation
The latest version of China's franchise law came into effect in 2005, as part of China's World Trade Organization (WTO) treaties. It eliminated the "two plus one" rule, which stipulated that a company must have at least two branches operating in China for at least one year before becoming a franchiser. This created a boundary to investment for many would-be entrepreneurs.
Regulation
Chinese law stipulates that both the franchiser and the franchisee are legal entities. Signed agreements between franchisers and franchisees must include quality and standards requirements, arrangements for franchise fees, and liability agreements in case of disputes. The franchiser must also be a mature business that is able to provide guidance, training and technical support to the franchisee.
Foreign Franchises
There are two types of foreign franchises that exist in China. The first is a Foreign Invested Enterprise (FIE), when an investor incorporates a new business in China and then acts as a sub-franchiser. The second type is a direct contractual relationship, in which the foreign enterprise is established outside of China but instead operates a local network of franchisees.
Regulations for the Administration of Commercial Franchising Operations
Order of the State Council of the People’s Republic of China-1
The 485th Order
The Regulations for the Administration of Commercial Franchising Operations, which was adopted at the 167th executive meeting of the State Council on January 31, 2007, are hereby promulgated and shall come into force as of May 1, 2007.
Premier Wen Jiabao