Guide to Franchising in China
- 1. Basic information about the commercial franchise;
- 2. Distribution information of franchised stores in China;
- 3. Franchisor's Commercial Prospectus;
- 4. Copy of business license or enterprise registration;
- 5. Copies of certificates of trademarks, patents and other business resources related to franchise activities;
- 6. Sample franchise agreement;
- 7. Franchise operational manuals;
- 8. Marketing plan;
Full Answer
What are the legal requirements for franchising in China?
Third, franchises in China are subject to national network-based record filing. This requires the franchisor to file their records with the relevant commercial authorities within 15 days after initially signing a franchise contract with the franchisee. For foreign franchisors, there are two common ways to enter the Chinese market:
How many franchisors are there in China?
"As of January 2019, 4,368 franchisors have registered with the Ministry of Commerce, while unofficial statistics indicate that China already has over 4,500 franchises and chains with some 400,000 outlets in operation, making China one of the largest franchise markets in the world."
How can foreign franchisors gain a market presence in China?
To gain a foothold in the Chinese market, franchisors are advised to familiarize themselves with the country’s regulatory structure and consumer market preferences. In this article, we explain China’s franchise market and highlight necessary legal precautions for foreign companies seeking a presence in this market.
How long does it take to enter China as a franchisor?
This requires the franchisor to file their records with the relevant commercial authorities within 15 days after initially signing a franchise contract with the franchisee. For foreign franchisors, there are two common ways to enter the Chinese market:
How do you franchise a business in China?
Are you qualified to start a franchise in China?First, only enterprises can engage in business as franchisors. ... Second, the enterprise should comply with a “2+1” rule, which means that it must operate at least two direct-owned outlets for more than one year in any part of the world – a local entity is not necessary.More items...•
What are the 4 types of franchising?
The four types of franchise business you can invest inJob or operator franchise. These owner operator franchises are usually home based, which keeps overheads down to a minimum. ... Management franchise. ... Retail and fast food franchises. ... Investment franchise.
What are the 5 types of franchising?
The five major types of franchises are: job franchise, product franchise, business format franchise, investment franchise and conversion franchise.
What are the 7 salient features of franchising?
The seven key characteristics are:Alignment. Alignment of the values and ethics of a business is essential both with the internal behaviour of the employees and externally with business partners. ... Commitment. ... Mutual interest. ... Communication. ... Accountability and responsibility. ... Professional conduct. ... Pre-agreed dispute resolution.
What franchise makes the most money?
What is the most profitable franchise to own? According to the Franchise 500 list of 2021, Taco Bell is the most profitable franchise to own. The food chain has been franchising for nearly 6 decades and is still seeking franchises worldwide. As of 2021, they have 7,567 open units.
What business structure is best for a franchise?
S-Corporations These shareholders then report this information on their personal tax returns with a Form K-1. This is an ideal legal structure for franchisees because they will have a limited number of shareholders, and those shareholders assume the tax liability whether they receive any income from profits or not.
How much money do you need for a franchise?
Franchise startup costs can be as low as $10,000 or as high as $5 million, with the majority falling somewhere between $100,000 and $300,000. The price all depends on the industry, location and type of franchise.
What are the disadvantages of franchising?
Buying a franchise means entering into a formal agreement with your franchisor. Franchise agreements dictate how you run the business, so there may be little room for creativity. There are usually restrictions on where you operate, the products you sell and the suppliers you use.
What are the 3 basic types of franchising?
There are three main types of franchise opportunities available, these are: Business format franchises. Product franchises, or Single operator franchises. Manufacturing franchises.
Why do franchises fail?
Overseeing and managing a large franchise system requires a significant amount of liquid capital. If a franchisor does not have adequate reserves, or if a large number of franchisees are struggling to make their monthly royalty payments, then this could lead to systemic failure and widespread franchise closures.
What are the basics of a franchise?
A franchise (or franchising) is a method of distributing products or services involving a franchisor, who establishes the brand's trademark or trade name and a business system, and a franchisee, who pays a royalty and often an initial fee for the right to do business under the franchisor's name and system.
Is a franchise a good investment?
If you're a fledgling entrepreneur or a seasoned business person wanting to diversify your holdings, you've probably wondered, “Are franchises a good investment?” The simple answer is yes, especially if a great opportunity presents itself. There is an obvious appeal to starting a business via buying a franchise.
What are the 3 basic types of franchising?
There are three main types of franchise opportunities available, these are: Business format franchises. Product franchises, or Single operator franchises. Manufacturing franchises.
What are the 2 types of franchises?
There are basically two types of franchises. There's Product Distribution Franchising (or what's really called traditional franchising), and there's Business Format Franchising, which most people recognize as franchising.
What are the types of franchising explain?
The three types of franchises are; the business format franchise, product distribution franchise and management franchise. Each franchise operates differently and in this guide, you will find the differences between the three.
What is franchise and its types?
A franchise is a joint venture between a franchisor and a franchisee. The franchisor is the original business. It sells the right to use its name and idea. The franchisee buys this right to sell the franchisor's goods or services under an existing business model and trademark.
When did China start franchising?
China adopted its first franchise law in 1997, but foreign franchising remained mostly a gray area at that time until a new law was announced in 2005, which eliminated legal restrictions on foreign investment in franchising.
What is franchising in business?
Franchising allows the franchisor to grant franchisees the right to use its business model, brand, know-how, intellectual property (IP), etc. to sell its branded products and services in exchange for fees, royalties, or other compensation. It has both advantages and disadvantages when compared to other business models.
What is the purpose of a franchise contract?
The franchise contract forms the heart of a franchise and provides the basis of the cooperation between the franchisor and the franchisee.
Why is franchising important?
On one hand, franchising enables franchisors to invest less money, to leverage franchisees’ local knowledge, and to internationalize quickly to many markets.
How to gain foothold in Chinese market?
To gain a foothold in the Chinese market, franchisors are advised to familiarize themselves with the country’s regulatory structure and consumer market preferences.
How long is the China Briefing?
February 11, 2019 Posted by China Briefing Written by Zoey Ye Zhang Reading Time: 9 minutes. China is one of the biggest franchise markets in the world and a key target for international franchisors with its vast middle-class consumer base. To gain a foothold in the Chinese market, franchisors are advised to familiarize themselves with ...
When should a franchisor report to the filing authority?
Moreover, the franchisor should, before March 31 in each subsequent year, report to the filing authority the conclusion, cancellation, termination, and renewal of the franchise contract in the previous year.
CHINA FRANCHISE OPPORTUNITIES
For the first time in our 36-year history, we’re eager to engage new domestic franchisee partners that share a passion for creating memorable...
CHINA FRANCHISE NEWS
Ziebart Inks Master Agreements to Bring Complete Vehicle Protection...
CHINA FRANCHISE RESOURCES
March 29 - April 1, 2022, Caesars Forum, LV. The Multi-Unit Franchising Conference is the premier annual event for the country’s leading Multi-Unit...
How long does a franchisee have to lease land?
Even if the franchisee owns the premises, the land under the building belongs to the state and is leased to the developer, usually for a term of 40 years. The franchisee may be required to vacate the premises if the lease is not renewed by the government.
What is the anti-monopoly law in China?
Article 17 (4) of the Anti-monopoly Law prohibits establishing exclusive geographical areas without justifiable cause for players with a dominant market position. Franchisors in China rarely have a significant market share that could constitute a dominant market position.
Can you terminate a franchise agreement?
The grounds for terminating a franchise agreement must be set out in the franchise agreement. Except for the cooling-off period set out in Article 12 of the franchise regulations, there are no prescribed grounds of termination. However, any termination provisions of the franchise agreement must comply with the duty of good faith and Chapter VI of the Contract Law.
Can a foreign law govern a franchise agreement?
Parties in a foreign-related transaction may select foreign law to govern the franchise agreement; however, parties cannot contract out of the application of the franchise regulations and choosing foreign law is not always recommended.
Is price fixing a monopoly?
Price fixing and minimum resale prices are prohibited in vertical agreements or horizontal monopoly agreements between competitors; however, the Anti-monopoly Law provides some exceptions for horizontal agreement s. The practice of setting ‘recommended prices’ may attract scrutiny from the anti-monopoly authorities if the franchisor enforces the recommendation.
Key Franchise Regulations
Franchisor
Franchisee
The '2+1 Rule'
Franchisor Activities Prior to 1 May 2007
Legal Entity Set-Up
- Under the franchise regulations, a franchisor must be anenterprise or other economic organisation. Therefore, if aninternational franchisor wants to conduct franchise activities inchina other than by way of a cross-border franchise agreement, itmust establish a legal entity in China. In this regard the foreignfranchisor must set up a foreign Invest...
Filings
Contract Between The Franchisor and Franchisee
Franchise Disclosure and Rescission Rights
Penalties