Monday, May 21, 2007

Commercial Franchise Registration Management Measures--Chinese Franchise Regulation


This new law, yet another importance piece of regulation in the Chinese franchise realm, came into effect on May 1,2007. It was signed into law on April 30, 2007, just one day before the effective date of the Regulations of Commercial Franchising Operations of the People's Republic of China. There seems to have quite a few areas of ambiguity, as does the Commercial Franchise Disclosure Management Measures, which I will post next.

15TH ORDER 2007

Commercial Franchise Registration Management Measures has been promulgated during the 6th meeting of the Ministry of Commerce. It shall go into effect on May 1, 2007.

Minister of Commerce
Bo Xi Lai
April 30, 2007

Commercial Franchise Regisitration Management Measures

Article One To strength the regulatory management of commercial franchising, and to maintain orders in the franchising market, the Measures have been promulgated pursuant to the Regulations of Commercial Franchising Operations (“Regulations”).

Article Two The Measures apply to all commercial franchising operations inside the People’s Republic of China.

Article Three Relevant departments, in charge of commercial regulations in the Ministry of Commerce, Provinces, Autonomous Regions, and Municipalities, are the proper registration agencies. If franchising operations are within Provinces, Autonomous Regions, and Municipalities, shall register the franchise in the departments in charge of commercial regulations; if franchising operations cross boundaries of Provinces, Autonomous Regions, and Municipalities, the franchise shall be registered in the relevant department of the Ministry of Commerce.

The management of franchise registration shall be implemented in a national network. Franchisors in compliance with the Regulations shall register their franchise through the governmental website:

Article Four Any person or entity has the right to report activities in violation of the Measures to agencies in charge of franchise registration.

Article Five A franchisor petitioning for registration shall provide the following documentation to the registering agency:

(1) A brief introduction of the franchise.

(2) A brief introduction of the distribution of all the franchised units in China.

(3) A copy of the franchisor’s marketing plan.

(4) A copy of the franchisor’s corporate business license or other important documents evidencing eligibility.

(5) A copy of the registrations of the franchisor’s trademarks, patents or other business resources related to the franchising operations.

(6) Documents provided by a commercial regulatory department in a city with administrative districts, evidencing a franchisor’s compliance with Article 7 Section 2 of the Regulations; with respect to company-operated units located outside China, a franchisor shall provide documents evidencing same (including Chinese Translation), which shall be notarized and certified by a Chinese Consulate located in the administrative region as such company-operated units.

The above section does not apply to a franchisor in franchising operations before May 1, 2007, but such a franchisor shall provide a copy of the first franchise agreement executed by both the franchisor and a franchisee inside China.

(7) Sample Franchise Contract.

(8) Table of contents of the Franchise Operation Manual (Must include the page number of each chapter and the total number of pages. With respect to Franchise Operation Manual accessible via franchise system intranet, provide the estimated pages after printing.).

(9) With respect to franchising of services or products subject to pre-approval pursuant to relevant laws and regulations, franchisor must provide documents evidencing such approval by relevant government agency.

(10) Franchisor’s affidavit, signed and sealed by legal agent of such franchisor.

The above-listed items (1) through (3) shall be filled out directly on the website; items (4) through (10) shall be submitted electronically via the website in PDF format.

To get the complete translation, please e-mail me or leave a comment with your address. My e-mail address

To access the complete texts of the law in Chinese, go here.

1 comment:

Anonymous said...

We have been waiting for three years for the Chinese Government to issue new regulations on franchising. We knew they were inevitable, in light of the manifest inadequacy of the only current regulatory treatment, a set of rules in we promulgated 1997. Perhaps more important, knew that China's commitments, made in order to move toward membership in the World Trade Organization, would require a new and more carefully developed regime. The several sets of proposals which were leaked over the years were all flawed, in one fashion or another.

Despite the anticipation, the release of draft rules by the Ministry of Commerce (the "MOFCOM") last week (with the first translations appearing in the West earlier this week) came as something of a surprise. They were drafted as an "emergency response" in order to meet the WTO's requirement that restrictions on franchising by foreign investors be lifted by December 11. The drafters seem to have lacked confidence that the full-fledged Commercial Franchise Regulation would be adopted in time, and the resultant Provisional Measures on the Regulation of Foreign Invested Enterprises Engaging in Commercial Franchising Business (Draft) (the "Measures") have the earmarks of a somewhat hasty operation. Because the translation which was circulated in America this week was inadequate, here's what we've learned from our own translation and, more importantly, from our discussions this week with those in China who are knowledgeable about the drafting process.