China's New Franchising Regime
New regulations on commercial franchises should contribute to making the mainland a much more accessible market for international franchisors. What are the new rules, and what questions regarding franchises remain unanswered?
Date:
June 2007
Keywords (click to search): [retail] [business formula] [Regulations for the Administration of Commercial Franchising] [MOFCOM] [licensing] [outlets] [consumer] [products] [sale of goods]
By Janet Jie Tang and Lu Ning of DLA Piper
The Chinese government recently adopted a new legal regime for franchising. The new regime consists of the Regulations for the Administration of Commercial Franchising (the Franchise Regulations) promulgated by the State Council on January 31 2007 and effective on May 1 2007, together with the Measures for the Administration of Record Filings in Connection with Commercial Franchising (the Filing Rules) and the Measures for the Administration of Information Disclosure in Connection with Commercial Franchising (the Disclosure Rules), both issued by the Ministry of Commerce (MOFCOM) on April 30 2007 and effective on May 1 2007. This new legal regime replaces the previous franchise rules issued by MOFCOM in 2005 (the MOFCOM Measures).
OVERVIEW OF THE REGULATIONS
First of all, for franchisors the new law greatly relaxes the "2+1 Rule" of the MOFCOM Measures, which used to require that a foreign franchisor must have two directly-operated outlets running in mainland China for one year before being entitled to franchise.
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