Chapter I General

Article 1 For the purpose of regulating commercial franchising activities, promoting the healthy and orderly development of commercial franchising, and safeguarding the market order, the formulation of these regulations.

Article 2 In the Chinese People's **** and the State engaged in commercial franchising activities, shall comply with these Regulations.

Article 3 The commercial franchising referred to in these regulations (hereinafter referred to as franchising), refers to the ownership of registered trademarks, corporate logos, patents, proprietary technology and other business resources (hereinafter referred to as the franchisor), in the form of a contract will have the business resources licensed to other operators (hereinafter referred to as the franchisee) to use the franchisee in accordance with the contract under a unified mode of business operations and pay the franchisee the franchise fee. The franchisor pays the franchisee a franchise fee for the business activity.

No entity or individual other than an enterprise may engage in franchising activities as a franchisor.

Article 4 Engaging in franchising activities shall be based on the principles of voluntariness, fairness and honesty and credit.

Article 5 The competent department of commerce under the State Council shall be responsible for the supervision and management of franchising activities nationwide in accordance with the provisions of these Regulations. Provinces, autonomous regions and municipalities directly under the Central People's Government, the competent department of commerce and the municipal people's government in accordance with the provisions of these regulations, is responsible for the supervision and management of franchising activities within the administrative region.

Article VI of any unit or individual violation of the provisions of these Regulations, the right to report to the competent business department. The competent department of commerce shall be promptly dealt with after receiving the report.

Chapter II Franchising Activities

Article 7 The franchisor engaging in franchising activities shall have a mature business model, and have the ability to provide the franchisee with continuous business guidance, technical support and business training services.

The franchisor engaging in franchising activities shall have at least 2 directly-managed stores and operate for more than 1 year.

Article 8 The franchisor shall, within 15 days from the date of the first conclusion of the franchise contract, file the record with the competent department of commerce in accordance with the provisions of these regulations. In the provinces, autonomous regions and municipalities directly under the Central Government engaged in franchising activities, shall be to the local provinces, autonomous regions and municipalities directly under the Central People's Government of the competent department of commerce for the record; across the provinces, autonomous regions and municipalities directly under the Central Government engaged in franchising activities, shall be to the competent department of commerce of the State Council for the record.

The franchisor shall submit the following documents and information to the competent department of commerce for record:

(1) a copy of business license or a copy of enterprise registration (registration) certificate;

(2) a sample of the franchise contract;

(3) a franchise operation manual;

(4) market plan;

(5) Written commitments and relevant supporting materials indicating its compliance with the provisions of Article 7 of these Regulations;

(vi) Other documents and information prescribed by the competent department of commerce under the State Council.

Franchise products or services, according to law should be approved to operate, the franchisor shall also submit the relevant approval documents.

Article IX The competent department of commerce shall, within 10 days from the date of receipt of the documents and information submitted by the franchisor in accordance with the provisions of Article 8 of these Regulations, be filed, and notify the franchisor. If the documents and information submitted by the franchisor are incomplete, the competent department of commerce may require it to submit additional documents and information within seven days.

Article 10 The competent department of commerce shall publish the list of franchisees for record on the government website and update it in time.

Article XI engaged in franchising activities, the franchisor and the franchisee shall use written form to enter into a franchise contract.

Franchise contract shall include the following main elements:

(a) the franchisor, the franchisee's basic situation;

(b) the content of the franchise, the term;

(c) the type of franchise fees, the amount of money and its payment method;

(d) business guidance, technical support, and business training services and other specific content and provide services;

Article XI of the franchise activities and the franchisee shall be in writing. (v) the quality, standard requirements and guarantee measures of the products or services;

(vi) the promotion and advertising of the products or services;

(vii) the protection of consumer rights and interests and the assumption of liabilities in the franchising business;

(viii) the change, cancellation and termination of the franchise contract;

(ix) the liability for breach of contract;

(x) the terms of the contract; and (ix) Liability for breach of contract;

(x) Settlement of disputes;

(xi) Other matters agreed between the franchisor and the franchisee.

Article 12 The franchisor and the franchisee shall agree in the franchise contract that the franchisee may unilaterally terminate the contract within a certain period of time after the conclusion of the franchise contract.

Article 13 The franchise contract shall provide for a franchise period of not less than three years. However, except with the consent of the franchisee.

The provisions of the preceding paragraph shall not apply if the franchisor and the franchisee renew the franchise contract.

Article 14 The franchisor shall provide the franchisee with a franchise operation manual, and in accordance with the agreed content and manner for the franchisee to continue to provide business guidance, technical support, business training and other services.

Article 15 The quality and standard of the products or services of the franchisee shall conform to the requirements of laws, administrative regulations and relevant state regulations.

Article 16 If the franchisor requires the franchisee to pay a fee before entering into the franchise contract, it shall explain in writing to the franchisee the purpose of the fee as well as the conditions and manner of refund.

Article 17 The promotion and publicity expenses collected by the franchisor from the franchisee shall be used in accordance with the purposes agreed in the contract. The use of promotion and publicity expenses shall be disclosed to the franchisee in a timely manner.

The franchisor shall not engage in deceptive or misleading behavior in its promotion and publicity activities, and the advertisements it publishes shall not contain content that publicizes the franchisee's earnings from engaging in franchising activities.

Article 18 Without the consent of the franchisor, the franchisee shall not transfer the franchise to others.

The franchisee shall not disclose to others or allow others to use the franchisor's commercial secrets in its possession.

Article 19 The franchisor shall report to the competent department of commerce in the first quarter of each year on the conclusion of the franchise contract in the preceding year.

Chapter III Information Disclosure

Article 20 The franchisor shall, in accordance with the provisions of the competent commercial department of the State Council, establish and implement a complete information disclosure system.

Article 21 The franchisor shall, at least 30 days before the date of conclusion of the franchise contract, provide the franchisee in writing with the information specified in Article 22 of these Regulations and with the text of the franchise contract.

Article 22 The franchisor shall provide the franchisee with the following information:

(1) the franchisor's name, domicile, legal representative, amount of registered capital, scope of business, and the basic situation of engaging in franchising activities;

(2) the franchisor's registered trademarks, corporate logos, patents, know-how, and the basic situation of the mode of operation;

(iii) the type, amount and payment method of the franchise fee (including whether or not to collect a deposit and the conditions and method of returning the deposit);

(iv) the price and conditions of the products, services and equipment provided to the franchisee;

(v) the specific content, mode of provision and implementation plan for the provision of services such as business guidance, technical support and business training to the franchisee on an ongoing basis

(vi) specific methods of guidance and supervision of the franchisee's business activities;

(vii) investment budget for the franchised outlets;

(viii) the number of existing franchisees in China, their geographical distribution and assessment of their business conditions;

(ix) summary of the financial and accounting reports audited by a CPA firm in the last 2 years and summary of the audit reports;

(xi) summary of the financial and accounting reports audited by a CPA firm in the last 2 years and summary of the audit reports;

(xiv) the number of franchisees and their business conditions; and Summary of audit report;

(j) Litigation and arbitration related to franchising within the last 5 years;

(k) Whether the franchisor and its legal representative have any major illegal business records;

(l) Other information as stipulated by the competent business department of the State Council.

Article 23 The information provided by the franchisor to the franchisee shall be true, accurate and complete, and shall not conceal relevant information or provide false information.

The franchisor shall promptly notify the franchisee of any material change in the information provided by the franchisor to the franchisee.

If the franchisor conceals relevant information or provides false information, the franchisee may terminate the franchise contract.

Chapter IV Legal Liability

Article 24 If the franchisor does not have the conditions stipulated in the second paragraph of Article 7 of these Regulations and engages in franchising activities, the competent department in charge of commerce shall order rectification, confiscate the illegal income, impose a fine of not less than 100,000 yuan and not more than 500,000 yuan, and shall make a public announcement.

If units and individuals other than enterprises engage in franchising activities as franchisees, the competent department of commerce shall order the cessation of illegal business activities, confiscate the illegal income, and impose a fine of not less than 100,000 yuan and not more than 500,000 yuan.

Article 25 If a franchisor fails to file a record with the competent department of commerce in accordance with the provisions of Article 8 of these Regulations, the competent department of commerce shall order the filing of the record within a certain period of time, and impose a fine of not less than RMB 10,000 yuan and not more than RMB 50,000 yuan; if it fails to file the record after the expiration of the period of time, the franchisor shall impose a fine of not less than RMB 50,000 yuan and not more than RMB 100,000 yuan, and shall make a public announcement.

Article 26 If a franchisor violates the provisions of Articles 16 and 19 of these Regulations, the competent department of commerce shall order rectification, and may impose a fine of not more than RMB 10,000 yuan; if the circumstances are serious, it shall impose a fine of not less than RMB 10,000 yuan and not more than RMB 50,000 yuan, and shall make a public announcement.

Article 27 The franchisor violates the provisions of Article 17, paragraph 2 of the Regulations, the administrative department for industry and commerce shall order correction, impose a fine of 30,000 yuan or more than 100,000 yuan; the circumstances are serious, impose a fine of 100,000 yuan or more than 300,000 yuan, and shall be announced; constitutes a crime, shall be investigated for criminal responsibility.

Franchisees who use advertisements to commit deceptive and misleading acts shall be punished in accordance with the relevant provisions of the Advertising Law.

Article 28 If a franchisor violates the provisions of Article 21 and Article 23 of these Regulations, and the franchisee reports to the competent department of commerce and the report is found to be true, the competent department of commerce shall order rectification and impose a fine of not less than RMB 10,000 yuan and not more than RMB 50,000 yuan; if the circumstances are serious, a fine of not less than RMB 50,000 yuan and not more than RMB 100,000 yuan shall be imposed, and shall be announced.

Article 29 fraudulently obtaining other people's property in the name of franchising, constitutes a crime, shall be investigated for criminal liability; not yet constitutes a crime, by the public security organs in accordance with the "Chinese People's Republic of China *** and the State Public Security Administration Punishment Law" shall be punished.

To engage in pyramid schemes in the name of franchising, shall be punished in accordance with the relevant provisions of the Regulations on the Prohibition of Pyramid Schemes.

Article 30 The staff of the competent business department who abuses their power, neglects their duties, or engages in malpractice for personal gain, constituting a crime, shall be investigated for criminal responsibility according to law; if the crime is not yet constituted, they shall be punished according to law.

Chapter V Supplementary Provisions

Article 31 If the franchising activity involves trademark license or patent license, it shall be handled in accordance with the provisions of laws and administrative regulations on trademarks and patents.

Article 32 The relevant associations and organizations shall, under the guidance of the competent department of commerce under the State Council, formulate specifications for franchising activities in accordance with the provisions of these Regulations, strengthen the self-discipline of the industry, and provide relevant services for the parties involved in franchising activities.

Article 33 The implementation of these regulations has been engaged in franchising activities before the franchisee shall, within one year from the date of implementation of these regulations, in accordance with the provisions of these regulations to the competent department of commerce for the record; late filing, in accordance with the provisions of Article 25 of these regulations shall be punished.

The preceding paragraph of the franchisee, shall not apply to the provisions of Article 7, paragraph 2 of these Regulations.

Article 34 These Regulations shall come into force on May 1, 2007.

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Papa Review

The original text of the regulation is available here using Baidu

It is available here using google

Important key points within the regulation have been bolded in red.

In summary, it can be seen that the so-called franchise licenses that are mixed up in the market are quite a few that do not have the qualifications for basic franchising.

More often than not, they provide false information, misleadingly exaggerate business performance, and just aim to make money.

Many of the franchise allies themselves do not have the ability to sustain operations, franchise investment is the main source of profit.

From the logical point of view, the franchisee alliance owner's own store profitability may still have the opportunity to franchisee profitability, more often than not, itself is not profitable, how can the franchisee profitability?

But the replication of profitability is a very specialized science, not something that can be mastered by just any small store.

Here to advise investors who want to do join:

1. First to headquarters to understand the specific information of the franchisee, including the address phone profitability, can not be truthful on the problem.

2. Franchisee mouth of a sentence is better than the headquarters of a hundred words, but be careful with this so-called "franchisee" is not the headquarters of the child care.

3. Be sure to carefully read the Ministry of Commerce's [Franchise Management Regulations], any guarantee of their own written into the franchise contract.