Regulations on the Administration of Commercial Franchise

the State Council Order No.485

Promulgated date: 21171216 Implementation date: 21171511 Promulgated by: the State Council

Chapter I General Provisions

Chapter II Franchise Activities

Chapter III Information Disclosure

Chapter IV Legal Liability

Chapter V Supplementary Provisions <

February 6, 2117

Chapter I General Provisions

Article 1 These Regulations are formulated for the purpose of regulating commercial franchising activities, promoting the healthy and orderly development of commercial franchising and maintaining market order.

article 2 commercial franchising activities within the territory of the people's Republic of China shall abide by these regulations.

article 3 commercial franchising (hereinafter referred to as franchising) as mentioned in these regulations refers to the business activities of an enterprise (hereinafter referred to as franchisor) that owns registered trademarks, enterprise logos, patents, proprietary technologies and other business resources, and licenses the business resources it owns to other operators (hereinafter referred to as franchisees) in the form of contracts, and the franchisees conduct business under a unified business model according to the contract and pay franchise fees to the franchisees.

units and individuals other than enterprises may not engage in franchise activities as franchisees.

Article 4 Franchising activities shall follow the principles of voluntariness, fairness, honesty and credibility.

article 5 the competent commercial department of the State Council shall be responsible for the supervision and management of franchise activities nationwide in accordance with the provisions of these regulations. The competent commercial departments of the people's governments of provinces, autonomous regions and municipalities directly under the Central Government and the competent commercial departments of the municipal people's governments divided into districts shall be responsible for the supervision and administration of franchise activities within their respective administrative areas in accordance with the provisions of these regulations.

article 6 any unit or individual shall have the right to report to the competent commerce department any act that violates the provisions of these regulations. After receiving the report, the competent commercial department shall handle it in time according to law.

chapter ii franchising activities

article 7 a franchisor shall have a mature business model and the ability to continuously provide business guidance, technical support and business training for the franchisee.

a franchisor shall have at least two direct stores in franchise activities, and the operating time shall exceed 1 years.

article 8 a franchisor shall, within 15 days from the date of first concluding a franchise contract, file with the competent commercial department in accordance with the provisions of these regulations. Engaged in franchise activities within the scope of provinces, autonomous regions and municipalities directly under the central government, it shall be filed with the competent commercial departments of the local people's governments of provinces, autonomous regions and municipalities directly under the central government; Those who engage in franchising activities across provinces, autonomous regions and municipalities directly under the Central Government shall file with the competent department of commerce of the State Council.

The franchisor shall submit the following documents and materials when filing with the competent commercial department:

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

(2) sample franchise contract;

(3) Franchise operation manual;

(4) market plan;

(5) a written commitment and relevant certification materials showing that it complies with the provisions of Article 7 of these Regulations;

(6) other documents and materials as stipulated by the competent department of commerce of the State Council.

if the franchised products or services should be approved before they can be operated according to law, the franchisor shall also submit relevant approval documents.

article 9 the competent commercial department shall, within 11 days from the date of receiving the documents and materials submitted by the franchisor that conform to the provisions of article 8 of these regulations, put them on record and notify the franchisor. If the documents and materials submitted by the franchisor are incomplete, the competent commercial department may require them to submit supplementary documents and materials within 7 days.

article 11 the competent commerce department shall publish the list of franchisers for filing on the government website and update it in time.

article 11 to engage in franchise activities, the franchisor and the franchisee shall conclude a franchise contract in written form.

A franchise contract shall include the following main contents:

(1) Basic information of the franchisor and franchisee;

(2) the content and duration of franchising;

(3) the type, amount and payment method of franchise expenses;

(4) the specific contents and ways of providing services such as business guidance, technical support and business training;

(5) the quality, standard requirements and guarantee measures of products or services;

(6) promotion and advertising of products or services;

(7) the protection of consumers' rights and interests and the commitment of compensation liability in franchising;

(8) Alteration, rescission and termination of the franchise contract;

(9) Liability for breach of contract;

(11) dispute resolution;

(11) other matters agreed by the franchisor and the franchisee.

article 12 the franchisor and the franchisee shall stipulate in the franchise contract that the franchisee may unilaterally terminate the franchise contract within a certain period after the franchise contract is concluded.

article 13 the franchise period stipulated in the franchise contract shall be not less than 3 years. However, unless the franchisee agrees.

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

article 14 the franchisor shall provide the franchisee with a franchise operation manual, and continuously provide the franchisee with business guidance, technical support, business training and other services according to the agreed contents and methods.

article 15 the quality and standards of franchised products or services shall meet the requirements of laws, administrative regulations and relevant state regulations.

article 16 if the franchisor requires the franchisee to pay the fee before concluding the franchise contract, it shall explain to the franchisee in writing the purpose of the fee and the conditions and methods of refund.

article 17 the promotion and publicity expenses charged by the franchisor from the franchisee shall be used according to the purposes agreed in the contract. The use of promotion and publicity expenses shall be disclosed to the franchisee in a timely manner.

in the promotion and publicity activities, the franchisor shall not cheat or mislead, and the advertisements it publishes shall not contain the contents promoting the franchisee's income from franchise activities.

article 18 without the consent of the franchisor, the franchisee shall not transfer the franchise to others.

the franchisee shall not disclose or allow others to use the business secrets of the franchisee in his possession.

Article 19 A franchisor shall report to the competent commercial department the franchise contract concluded in the previous year in the first quarter of each year.

Chapter III Information Disclosure

Article 21 A franchisor shall establish and implement a complete information disclosure system in accordance with the provisions of the the State Council Municipal Department of Commerce.

article 21 the franchisor shall provide the information specified in article 22 of these regulations to the franchisee in writing at least 31 days before the conclusion of the franchise contract, and provide the franchise contract text.

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

(1) The franchisor's name, domicile, legal representative, registered capital, business scope and basic information on franchise activities;

(2) Basic information about the registered trademark, enterprise logo, patent, proprietary technology and business model of the franchisor;

(3) the type, amount and payment method of the franchise expenses (including whether to collect the deposit, and the conditions and methods for returning the deposit);

(4) the prices and conditions of products, services and equipment provided to the franchisee;

(5) The specific content, mode of provision and implementation plan of continuous provision of business guidance, technical support, business training and other services for the franchisee;

(6) Specific measures for guiding and supervising the franchisee's business activities;

(7) investment budget of franchise outlets;

(8) Evaluation of the number, geographical distribution and operating conditions of existing franchisees in China;

(9) summaries of financial and accounting reports and audit reports audited by accounting firms in the last two years;

(11) the litigation and arbitration related to franchising in the last five years;

(11) whether the franchisor and its legal representative have major illegal business records;

(12) other information as stipulated by the competent department of commerce 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.

in case of any major change in the information provided by the franchisor to the franchisee, it shall promptly notify the franchisee.

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

Chapter IV Legal Liabilities

Article 24 If a franchisor does not meet the requirements stipulated in the second paragraph of Article 7 of these Regulations and engages in franchise activities, the competent commercial department shall order it to make corrections, confiscate its illegal income, impose a fine of not less than RMB 1,111 yuan but not more than RMB 511,111 yuan, and make a public announcement.

if other units and individuals other than enterprises engage in franchise activities as franchisees, the competent commercial department shall order them to stop their illegal business activities, confiscate their illegal income, and impose a fine ranging from RMB 1,111 yuan to RMB 511,111 yuan.

Article 25 Where a franchisor fails to file a record with the competent commerce department in accordance with Article 8 of these Regulations, the competent commerce department shall order him to file a record within a time limit and impose a fine of not less than RMB 11,111 but not more than RMB 51,111; If it fails to put on record within the time limit, it shall be fined between 51,111 yuan and 1,111 yuan, and shall be announced.

Article 26 Where a franchisor violates the provisions of Articles 16 and 19 of these Regulations, the competent commercial department shall order it to make corrections and may impose a fine of less than RMB 1,111; If the circumstances are serious, a fine of not less than 1,111 yuan but not more than 51,111 yuan shall be imposed, and an announcement shall be made.

article 27 if a franchisor violates the provisions of paragraph 2 of article 17 of these regulations, the administrative department for industry and commerce shall order it to make corrections and impose a fine of not less than 31,111 yuan but not more than 1,111 yuan; If the circumstances are serious, a fine of not less than 111,111 yuan but not more than 311,111 yuan shall be imposed, and an announcement shall be made; If a crime is constituted, criminal responsibility shall be investigated according to law.

if a franchisor uses advertisements to cheat or mislead, it shall be punished in accordance with the relevant provisions of the advertising law.

article 28 if the franchisee violates the provisions of articles 21 and 23 of these regulations, and the franchisee reports it to the competent commerce department and it is verified, the competent commerce department shall order it to make corrections, and impose a fine ranging from RMB 1,111 yuan to RMB 51,111 yuan; If the circumstances are serious, a fine of not less than 51,111 yuan but not more than 1,111 yuan shall be imposed, and an announcement shall be made.

Article 29 Whoever defrauds others of property in the name of franchising, which constitutes a crime, shall be investigated for criminal responsibility according to law; If it does not constitute a crime, the public security organ shall punish it in accordance with the provisions of the Law of the People's Republic of China on Public Security Administration Punishment.

whoever engages in pyramid selling in the name of franchising shall be punished in accordance with the relevant provisions of the regulations on the prohibition of pyramid selling.

Article 31 If any staff member of the competent commercial department abuses his power, neglects his duty or engages in malpractices for personal gain, which constitutes a crime, he shall be investigated for criminal responsibility according to law; If it does not constitute a crime, it shall be punished according to law.

Chapter V Supplementary Provisions

Article 31 Where trademark licensing or patent licensing is involved in franchise activities, it shall be handled in accordance with the provisions of laws and administrative regulations on trademarks and patents.

article 32 under the guidance of the competent commercial department of the State Council, relevant associations and organizations shall formulate the norms of franchise activities in accordance with the provisions of these regulations, strengthen industry self-discipline and provide relevant services to the parties involved in franchise activities.

Article 33 Franchisors who have engaged in franchise activities before the implementation of these Regulations shall, within 1 years from the date of implementation of these Regulations, file with the competent commercial authorities in accordance with the provisions of these Regulations; Those who fail to put on record within the time limit shall be punished in accordance with the provisions of Article 25 of these regulations.

the provisions of the second paragraph of article 7 of these regulations shall not apply to the franchiser specified in the preceding paragraph.

article 34 these regulations shall come into force as of may 1, 2117.