Regulation on the Administration of Commercial Franchises

Regulation on the Administration of Commercial Franchises Order of the State Council (No. 485) The Regulation on the Administration of Commercial Franchises, 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 February 6, 2007 Regulation on the Administration of Commercial Franchises Chapter I General Provisions Article 1 This Regulation is formulated for the purpose of regulating commercial franchises, promoting the healthy and orderly development of the commercial franchise industry and maintaining the market order. Article 2 The engagement in commercial franchise within the territory of the People's Republic of China shall be governed by this Regulation. Article 3 The term “commercial franchise” (hereinafter referred to as “franchise”) as mentioned in this Regulation refers to such business operations by which an enterprise owning a registered trademark, enterprise mark, patent, know-how or any other business resource (hereinafter referred to as “franchiser”) confers the said business resource to any other business operator (hereinafter referred to as “franchisee”) by means of contract, and the franchisee undertakes business operations under the uniform business model as stipulated by the contract, and pay franchising fees to the franchiser. No entity or individual other than enterprises may engage in the franchise business as a franchiser. Article 4 The principles of free will, fairness, honesty and good faith shall be followed for engagement in franchise activities. Article 5 The commercial administrative department of the State Council shall be responsible for supervising and administrating the franchise industry all over the country according to this Regulation. The commercial administrative department of the provinces, autonomous regions, or municipalities directly under the Central Government and the commercial administrative department of the people's government of the cities divided into districts shall be responsible for supervising and administrating the franchise industry within its own jurisdiction according to this Regulation. Article 6 Any entity or individual has the right to tip off any act against this Regulation to the commercial administrative department, and the commercial administrative department shall, after receipt of such tip-off, handle it in a timely manner. Chapter II Franchised Operations Article 7 A franchiser for engagement in franchise activities shall possess a mature business model and the ability to provide long-term business guidance, technical support, business training and other services to the franchisee. A franchiser for engagement in franchise activities shall have at least two direct sales stores, and have undertaken the business for more than a year. Article 8 A franchiser shall, within 15 days after having concluded a franchise contract for the first time, report it to the commercial administrative department for archival filing according to this Regulation. If a franchiser engages in any franchised operations within the scope of a province, autonomous region, or municipality directly under the Central Government, it shall be put on the archives of the commercial administrative department of the province, autonomous region or municipality directly under the Central Government; and if a franchiser engages in any franchised operations within the scope of two or more provinces, autonomous regions, or municipalities directly under the Central Government, it shall be put on the archives of the commercial administrative department of the State Council. For the archival filing, a franchiser shall submit the following documents and materials to the commercial administrative department: (1) a photocopy of the business license or enterprise registration certificate; (2) a sample franchise contract; (3) a brochure for franchised operations; (4) a market plan; (5) a written commitment and relevant certification materials proving that the provisions in Article 7 of this Regulation are followed; and (6) other documents and materials prescribed by the commercial administrative department of the State Council. In case the product or service for franchise cannot be dealt in until it is approved, the franchiser shall also submit a relevant approval document. Article 9 The commercial administrative department shall carry out the archival filing and give a notice to the franchiser within 10 days after receipt of the docu......