商务部令2004年第25号

（Promulgated by the Ministry of Commerce on 30 December 2004 and effective as of 1 February 2005.）

颁布日期：20041230 　实施日期：20050201 　颁布单位：商务部

PART ONE　GENERAL PROVISIONS

Article 1　These Procedures are formulated in order to standardize commercial franchising， to safeguard the lawful rights and interests of the parties， and to promote the healthy and orderly development of commercial franchise.

Article 2　For the purposes of these Procedures， the term “commercial franchising” （hereafter， franchising） shall refer to the arrangement whereby a franchisor， through the conclusion of a contract， authorizes a franchisee to use business resources such as the trademark， trade name and business model of which it has the right to authorize the use thereof by other parties. The franchisee shall conduct business activities in accordance with the stipulations of the contract under a uniform business system and pay the franchise fees to the franchisor.

Article 3　These Procedures shall apply to the engagement in franchising activities within the People‘s Republic of China.

Article 4　A franchisor may， in accordance with the stipulations of the contract， directly grant franchise rights to a franchisee. The franchisee may invest in and establish franchise outlets and engage in business activities， but may not grant sub-franchises. If a franchisee has been granted exclusive franchise rights within a particular area， it may further grant sub-franchise to another applicant and may establish its own franchise outlets within that area.

Article 5　The operation of franchise business shall abide by the laws and regulations of the People‘s Republic of China and the principles of voluntariness， fairness， honesty and trustworthiness， and shall not harm the lawful rights and interests of consumers.

A franchisor shall not use a franchise under false pretences to illegally engage in direct selling activities.

A franchisor that engages in commercial activities in the form of franchising may not create market monopoly or obstruct fair competition.

Article 6　The Ministry of Commerce shall implement regulation of franchising activities throughout China. Departments in charge of commerce at all levels shall implement regulation of franchising activities within their area of jurisdiction.

PART TWO　FRANCHISING PARTIES

Article 7　A franchisor shall have the following qualifications：

1. it shall be an enterprise or other economic organization established according to law；

2. it shall have the business resources such as trademark， trade name and business model of which it has the right to authorize the use thereof by another party；

3. it shall have the capability to provide long-term business guidance and training services to the franchisees；

4. it shall have at least two directly-run stores within China that have been operated for at least one year， or directly run stores set up by its subsidiaries or companies in which it has a controlling share；

5. where the franchisor is required to provide goods for franchising， it shall have a goods supply system that is stable and that can guarantee the quality， and shall be able to provide relevant services； and

6. it shall have good reputation and no record of fraudulent activities in the form of franchising.

Article 8　A franchisee shall have the following qualifications：

1. it shall be an enterprise or other economic organization established according to law； and

2. it shall have the funds， fixed premises and personnel， etc. that commensurate with franchising.

Article 9　A franchisor shall enjoy the following rights：

1. to supervise the business activities of the franchisee in accordance with the stipulations of the contract in order to ensure uniformity of the franchising system and the consistency of the quality of the products and services provided；

2. to revoke the franchising qualifications in accordance with the stipulations of the contract of a franchisee that violates the franchise contract， infringes the lawful rights and interests of the franchisor， or damages the franchising system；

3. to collect franchise fees and deposits in accordance with the stipulations of the contract； and

4. other rights stipulated in the contract.

Article 10　A franchisor shall perform the following obligations：

1. to disclose information according to the relevant provisions hereof in a timely manner；

2. to grant the franchise rights for the use of the franchisee， and to provide business symbols and operation manual that represent the franchising system；

3. to provide to the franchisee sales， business or technical guidance， training and other services necessary for the operation of the franchise；

4. to supply goods to the franchisee in accordance with the stipulations of the contract. Except in the case of exclusive commodities or goods that must be provided by the franchisor or a supplier designated by the franchisor to ensure the quality of franchising， the franchisor shall not compel the franchisee to accept goods supplied by itself， but it may stipulate that the goods must reach the quality standard， or suggest several suppliers for the franchisee to select；

5. the franchisor shall be responsible for guaranteeing the quality of goods supplied by the suppliers it designates；

6. sales promotion and advertising stipulated in the contract； and

7. other obligations stipulated in the contract.

Article 11　A franchisee shall enjoy the following rights：

1. business resources such as trademark， trade name and business model the use of which are authorized by the franchisor；

2. training and guidance provided by the franchisor；

3. timely supply of goods provided or arranged by the franchisor at the price stipulated in the contract；

4. sales promotion support uniformly provided by the franchisor； and

5. other rights stipulated in the contract.

Article 12　A franchisee shall perform the following obligations：

1. to engage in business activities in accordance with the stipulations of the contract；

2. to pay the franchise fees and the deposit；

3. to safeguard the uniformity of the franchising system， and may not grant sub-franchises without the permission of the franchisor；

4. to provide to the franchisor in a timely manner true information stipulated in the contract such as business conditions and financial status；

5. to accept guidance and supervision of the franchisor；

6. to maintain the confidentiality of the trade secrets of the franchisor； and

7. other obligations stipulated in the contract.

PART THREE　FRANCHISE CONTRACTS

Article 13　The particulars of franchise contracts shall be agreed by the parties and shall in general include the following：

1. the names and domiciles of the parties；

2. the particulars， term and place of the grant of use of franchise rights， and whether or not it is exclusive；

3. the type， amount and method of payment of franchise fees， and the methods of collection and refund of deposit；

4. confidentiality clauses；

5. control of and responsibility for the quality of franchised goods and services；

6. training and guidance；

7. use of trade name；

8. use of intellectual property rights such as trademark；

9. complaints of consumers；

10. promotion and advertising；

11. modification and termination of contract；

12. liability for breach of contract；

13. clauses on resolution of disputes； and

14.　other clauses agreed by both parties.

Article 14　Franchise fees shall refer to the fees paid by the franchisee for obtaining the franchise rights， which shall include the following types：

1. initial fee： a lump sum payment by the franchisee to the franchisor for franchise rights；

2. usage fee： a fee paid periodically by the franchisee to the franchisor in the course of use of franchise rights according to a certain standard or ratio； and

3. other stipulated fees： other fees paid by the franchisee to the franchisor in accordance with the stipulations of the contract for relevant goods or services provided by the franchisor.

Deposit shall refer to certain fees collected by the franchisor from the franchisee to ensure that the franchisee performs the franchise contract. The deposit shall be refunded to the franchisee upon expiration of the contract.

Both parties to a franchise contract shall negotiate and determine franchise fees and deposit in accordance with the principles of fairness and reasonableness.

Article 15　The term of franchise contracts shall in general be no less than three years.

Upon expiration of a franchise contract， the franchisor and the franchisee may determine upon consultation the conditions for renewal of the franchise contract based on the principles of fairness and reasonableness.

Article 16　After a franchise contract has terminated， the original franchisee may not continue to use the registered trademark， trade name or other marks of the franchisor without the consent of the franchisor； apply to register the registered trademark of the franchisor as the trademark of commodities or services of similar type； register an enterprise trade name with wordings that are identical or similar to the registered trademark of the franchisor； or use a mark identical or similar to the registered trademark， trade name or shop decoration of the franchisor for identical or similar commodities or services.

PART FOUR　INFORMATION DISCLOSURE

Article 17　The franchisor and franchisee shall disclose the relevant information in a timely manner prior to the conclusion of the franchise contract and in the course of franchising.

Article 18　The franchisor shall provide to the applicant true and accurate basic information related to franchising in writing and the text of the franchise contract 20 days prior to the formal conclusion of the contract.

Article 19　The basic information to be disclosed by the franchisor shall include：

1. the name， domicile， registered capital， scope of business and the term of franchise of the franchisor， and basic details such as the contents of financial reports audited by an accounting firm and details of tax payments；

2. the number， location， business status and budget for investment in the franchise outlets of the franchisee， and the ratio of franchisees that have dissolved the franchise contract to the total number of franchisees；

3. registration， use of licence and litigation concerning the trademark， and relevant details of other business resources such as the trade name and business model；

4. type， amount and method of collection of franchise fees， and method of refund of deposit；

5. details of any litigation in which it has been involved during the most recent five years；

6. various goods supply or services that can be provided to the franchisee， as well as the supplementary conditions and restrictions， etc.；

7. proof of ability to provide training and guidance to the franchisee， and the actual details of training or guidance provided；

8. basic details of the legal representative and other principal responsible persons， and whether they have been subject to criminal penalty or have borne personal liability for bankruptcy of enterprise， etc.； and

9. other information and details that the franchisee is required to disclose by the franchisor.

If the information disclosed is incomplete or false， thereby causing economic loss to the franchisee， the franchisor shall bear the liability for compensation.

Article 20　The franchisee shall truthfully provide information on its business capabilities in accordance with the requirements of the franchisor， including proof of principal qualification， creditworthiness， property rights， etc. In the course of franchising， it shall provide in a timely manner information stipulated in the contract such as the true details of the business status in accordance with the requirements of the franchisor.

Article 21　In the course of franchising and after a franchise contract has terminated， the franchisee and its employees may not， without the consent of the franchisor， disclose， use or permit others to use the trade secrets of the franchisor that have come to their knowledge.

Article 22　Persons and applicants that have not yet verified a franchise contract with the franchisor but have knowledge of the franchisor‘s trade secrets through information disclosure of the franchisor shall be obliged to maintain confidentiality. Without the consent of the franchisor， they may not reveal， disclose or transfer the trade secrets of the franchisor to another party.

PART FIVE　ADVERTISING AND PROMOTION

Article 23　The advertising and promotion information provided by franchisors during promotion， sales promotion or sale of franchise rights shall be accurate， truthful and lawful， and there may not be fabrication or omission of important facts， or statements that may possibly be misleading.

Article 24　Records and figures of business income and profits of the franchisor or other relevant information referred to directly or indirectly in the advertising and promotion materials of the franchisors and franchisees shall be true， and the area and time involved shall be specified.

Article 25　Franchisors and franchisees may not imitate the trademark， advertising scenes and terms， or other distinguishing marks of another party by any method that may be misleading， fraudulent or create confusion.

Article 26　In franchising promotion activities， a franchisor may not exaggerate the profits from franchising or deliberately conceal circumstances that may objectively affect the profits of others.

PART SIX　SUPERVISION AND ADMINISTRATION

Article 27　Departments in charge of commerce at all levels shall strengthen administration and coordination of franchising activities within their administrative area， and shall guide the work of local industry associations （or chambers of commerce）。

Departments in charge of commerce at all levels shall establish credit files for franchisors and franchisees， and shall announce the names of enterprises in violation of regulations in a timely manner.

Article 28　Franchise industry associations （or chambers of commerce） shall formulate industry standards in accordance with these Procedures and exercise self-regulation to provide relevant services to franchising parties and promote the development of the industry.

Article 29　Franchisors shall， in January each year， submit the franchise contracts concluded in the previous year to their local department in charge of commerce and the department in charge of commerce at the place where the franchisee is located for record filing. Local departments in charge of commerce shall report the details of record filing to the department in charge of commerce at one level above.

Article 30　Where franchising activities involves patent licensing， a patent licensing contract shall be concluded in accordance with the provisions of the PRC， Trademark Law and its implementing rules， and record filing matters shall be handled in accordance with the Administration of the Record Filing of Patent Licensing Contracts Procedures.

Article 31　Prior to engagement in franchise activities， the franchisor shall handle record filing of the trademark licensing contract in accordance with the provisions of the PRC， Trademark Law and its implementing rules.

PART SEVEN　SPECIAL PROVISIONS GOVERNING FOREIGN-INVESTED ENTERPRISES

Article 32　Foreign-invested enterprises shall not engage in the types of business prohibited under the Foreign Investment Industrial Guidance Catalogue in the form of franchising.

Article 33　Foreign-invested enterprises engaging in commercial activities in the form of franchising shall apply to the original examination and approval authority for addition of “engagement in commercial activities in the form of franchising” to the scope of business， and shall submit the following materials：

1. application form and resolution of the board of directors；

2. enterprise business licence and approval certificate for foreign-invested enterprises （photocopy）；

3. amendment agreement for the contract and articles of association （in the case of foreign-invested enterprises， only amendments to articles of association shall be submitted）；

4. documentary materials in support of compliance with Article 7 hereof ；

5. basic information and details that reflect the provisions of Article 19 hereof；

6. a sample of the franchise contract； and

7. franchise operation manual.

The examination and approval authority shall issue a written decision on whether or not to approve the application within 30 days of the date of receipt of all the aforementioned application materials.

After an applicant has obtained approval， it shall handle the procedures for change of enterprise registration with the administration for industry and commerce within one month of receipt of the Approval Certificate for Foreign-invested Enterprises from the examination and approval authority.

Article 34　Where a foreign-invested enterprise engages in commercial activities in the form of franchising upon approval， it shall submit the franchise contract concluded in the previous year to the original examination and approval authority and the department in charge of commerce at the place where the franchisee is located for record filing in January each year.

Article 35　When a foreign investor establishes a foreign-invested enterprise that specifically engages in commercial activities in the form of franchising， it must comply with the provisions of relevant laws， regulations and rules on foreign investment in addition to these Procedures.

Article 36　Foreign-invested enterprises already engaged in commercial activities in the form of franchising before the implementation of these Procedures shall file a record of the details of the operation of business with the original examination and approval authority. Those continuing to engage in commercial activities in the form of franchising shall complete the relevant formalities in accordance with the procedure stipulated in this Part.

Article 37　Engagement in commercial activities in the form of franchising by Hong Kong， Macao and Taiwan investment enterprises in the mainland shall be handled with reference to the provisions of this Part.

PART EIGHT　LEGAL LIABILITY

Article 38　In case of violation of Article 7 or 8 hereof， the department in charge of commerce shall order rectification and may also impose a fine of not more than Rmb 30，000. Where the circumstances are serious， the administration for industry and commerce shall be requested to revoke the business licence.

Article 39　In case of failure to disclose information in accordance with the provisions hereof， the department in charge of commerce shall order rectification and impose a fine of not more than Rmb 30，000. Where the circumstances are serious， the administration for industry and commerce shall be requested to revoke the business licence.

Article 40　Where a franchisor carries out advertising and promotion in violation of the provisions hereof， such matters shall be handled in accordance with the provisions of the PRC， Advertising Law and other relevant laws， administrative regulations and rules.

PART NINE　SUPPLEMENTARY PROVISIONS

Article 41　The Ministry of Commerce shall be responsible for the interpretation of these Procedures.

Article 42　These Procedures shall be implemented as of 1 February 2005. The Administration of Commercial Franchise Procedures （Trial Implementation） promulgated by the former Ministry of Internal Trade shall be repealed simultaneously.