Franchise in China--Opportunities & Challenges Come Along with the New Law (III)

More Interpretative Problems

A. Franchisor Disclosure Amendments

Disclosure Guidelines states:

Article Seven With respect to changes to information provided in the
registration, a franchisor shall petition the registering agency to amend such
changes within thirty days of such changes.

Obviously, the letter of the law requires "changes" to be amended, but the sticky issue here is what do "changes" encompass. All changes, material and immaterial? Or just material?

It puzzles that that the government would impose the heavy burden of amending just any changes on a franchisor, especially foreign franchisors who operates in many countries with a high frequency of immaterial changes to the franchise system. But I am not in the position to twist arms with the express provisions in the Chinese law. So I consulted with a Chinese franchise lawyer based in Mainland China. He noticed the ambiguity in the Registration Guidelines too, and he opines that the "changes" referred to in Article Seven of the Registration Guidelines only encompass immaterial changes. Since he is in the process of writing an article on the same topic, I will wait for him to disclose his reasoning behind the interpretation even though I agree with him.

B. "Where exactly do I register?"--Franchisor

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.

Franchising to occur within provinces (省），autonomous regions (自治區），municipalities (直轄市), a franchisor needs to register in government agencies in charge of regulating commerce, and the cities must be the ones what have administrative districts (設區市).

Franchising to occur beyond geographical boundaries of provinces (省），autonomous regions (自治區），municipalities (直轄市), a franchisor needs to register with the Ministry of Commerce.

This rule begs the question: "If a franchisor wants to franchise within its province and beyond, does it have to register with the local agencies and the Ministry of Commerce?" According to a Chinese franchise lawyer, the answer to this question is affirmative.