Order of the State Council
No. 485 The Regulations on Administering Commercial Franchises have been adopted at the 167th executive meeting of the State Council on January February 6, 2007 Regulations on Administering Commercial Franchises Article 1 For the purpose of regulating commercial franchises, promoting the healthy and orderly development of the commercial franchise industry Article 2 The present Regulations shall apply to the activities of engaging in commercial franchise within the territory of the People’s Republic Article 3 The term “commercial franchise” (hereinafter referred to as “franchise”) as mentioned in the present Regulations means such business No entity or individual other than enterprises may conduct franchise business as a franchiser. Article 4 For engagement in franchise activities, the principles of free will, fairness, honesty and good faith shall be followed. Article 5 The commerce department under the State Council shall take charge of supervising and administrating the franchise industry all over Article 6 Any entity or individual is enpost_titled to tip off any act with violation of the present Regulations to the commerce department, and Chapter II Franchised Operations Article 7 For engaging in franchise activities, a franchiser shall have a mature business model and be capable of providing the franchisee A franchiser for engaging in franchise activities shall have two direct sales stores at least, and have conducted such business for Article 8 A franchiser shall, within 15 days after the subscription of a franchise contract for the first time, submit it to the commerce department A franchiser shall, for the archival filing, submit the commerce department the following documents and materials: (1) a copy of the business license or enterprise registration certificate; (2) a sample of the franchise contract; (3) a brochure for franchised operations; (4) a market plan; (5) a written commitment and related certification materials testifying that the provisions in Article 7 of the present Regulations are (6) other documents and materials as prescribed by the commerce department under the State Council. Where the product or service for franchise cannot be dealt in until it is approved, the franchiser shall also submit a related approval Article 9 The commerce department shall conduct the archival filing and notify the franchiser within 10 days after its receipt of the documents Article 10 The commerce department shall publish a name list of franchisers, which have been put on archives, on the government website, and Article 11 For engaging in franchise activities, the franchiser and the franchisee shall conclude a written franchise contract. A franchise contract shall cover the main contents as follows: (1) basic information in respect of the franchiser and the franchisee; (2) contents and term of the franchise; (3) type, amount and payment method for the franchising fees; (4) concrete contents and methods for providing business guidance, technical support, business training and other services; (5) quality, standards for the product or service and guaranty measures; (6) sales promotion, advertising and publicity in respect of the product or service; (7) the protection of consumers’ rights and interests and the assumption of compensation liabilities in the franchise; (8) alteration, release and termination of the franchise contract; (9) liabilities for breach of the contract; (10) dispute resolution methods; and (11) other matters as agreed upon by the franchiser and the franchisee. Article 12 It shall be stipulated in the franchise contract concluded between the franchiser and the franchisee that the franchisee may unilaterally Article 13 Unless it is otherwise agreed upon by the franchisee, the franchise term as stipulated in the franchise contract may not be less When the franchiser and the franchisee renew the franchise contract, the preceding paragraph may not apply. Article 14 A franchiser shall provide its franchisees with a brochure for franchised operations, and shall continuously provide business guidance, Article 15 The quality and standards of the product or service for franchise shall comply with the laws, administrative regulations and the Article 16 Where a franchiser requires a franchisee to pay expenses before the subscription of the franchise contract, it shall explain to the Article 17 The promotion and publicity expenses as collected by a franchiser from a franchisee shall be used for the purposes as agreed upon A franchiser may not resort to frauds or misleading in the promotion or publicity, and the advertisements it publicized may not include Article 18 A franchisee may not transfer the franchise to anyone else without consent of the franchiser. A franchisee may not divulge the business secret of the franchiser to which it has accessed to anyone else or allow anyone else to Article 19 A franchiser shall report to the commerce department the information in respect of the subscription of franchise contracts in the Chapter III Information Disclosure Article 20 A franchiser shall set up and carry out a perfect information disclosure system in accordance with the provisions as prescribed by Article 21 A franchiser shall provide the franchisee with the information as prescribed in Article 22 of the present Regulations and the text Article 22 A franchiser shall provide the franchisee with the information as follows: (1) the name, domicile, legal representative, registered capital, business scope of the franchiser and basic information in respect of (2) the basic information in respect of the registered trademark, enterprise mark, patent, know-how and business model of the franchiser; (3) type, amount of franchising fees and payment method (including whether the guaranty bonds should be collected as well as the conditions (4) prices and requirements for providing the franchisee with products, services and equipments; (5) specific contents of business guidance, technical support, business training and other services to be continuously provided to the (6) concrete measures for guiding and supervising the business activities of the franchisee; (7) the investment budget for the franchise outlet; (8) the quantity, distribution and business evaluation of franchisees currently existing within the territory of China; (9) digests of the financial statements and audit reports for the recent two years as audited by the accountant firm; (10) the conditions in respect of franchise-related lawsuits and arbitration for the recent five years; (11) in case the franchiser or its legal representative has any record of major illegal business operations; and (12) other information as prescribed by the commerce department under the State Council. Article 23 A franchiser shall provide its franchisees with authentic, accurate and complete information, and may not conceal any related information Where any significant change has occurred to the information provided by a franchiser to any of its franchisees, the franchiser shall If a franchiser conceals any related information or provides false information, the franchisee may terminate the franchise contract. Chapter IV Legal Liabilities Article 24 Where a franchiser does not satisfy the requirements as prescribed in Paragraph 2 of Article 7 of the present Regulations but engages Where an entity or individual, which does not possess an enterprise statues, engages in franchise activities as a franchiser, the Article 25 Where a franchiser fails to put itself on the archives of the commerce department in accordance with Article 8 of the present Regulations, Article 26 Where a franchiser violates Article 16 or 17 in the present Regulations, the commerce department shall order it to make corrections, Article 27 Where a franchiser violates Paragraph 2 of Article 17 in the present Regulations, the commerce department shall order it to make Where a franchiser conducts frauds or misleading by making use of advertisements, it shall be punished in accordance with the related Article 28 Where a franchiser violates Article 21 or 23 of the present Regulations, and a franchisee tips it off to the commerce department Article 29 Where any entity or individual cheats the property of someone else in the name of franchise and commits a crime, it or he shall be Where any entity or individual engages in pyramid selling in the name of franchise, it or he shall be punished in accordance with Article 30 Where any functionary of the commerce department abuses his authorities, neglects his duties or resorts to cheats and a crime is Chapter V Supplementary Rules Article 31 The license of trademarks and patents in relation to the franchised operations shall be handled in accordance with the laws and administrative Article 32 Related associations and organizations shall, under the guidance of the commerce department of the State Council, set down the provisions Article 33 Any franchiser engaging in franchise activities before the implementation of the present Regulations shall be put on the archives The franchiser prescribed in the preceding paragraph does not apply to the provisions in Paragraph 2 of Article 7 of the present Article 34 The present Regulations shall go into effect as of May 1, 2007. |
The State Council
2007-02-06