Before franchising, check MOFCOM filing, get written disclosure, and put a cooling-off period in the contract
Grade ABig benefitMoneyFreeSome timeNo willpower
By rule the franchisor needs at least 2 company-owned stores open 1 year, and must file with commerce authorities within 15 days after signing. Before signing it must give you 12 topics in writing—fees, when deposits return, how existing stores perform, and more. No filing, no disclosure, or pay-before-you-see-contract: walk away.
- Cost
- No money. On the Ministry of Commerce «Commercial Franchise Information Management System» site, check whether the brand is filed. Before signing, require written disclosure of everything they must tell you, together with the contract text. A few hours.
- Benefit
- Regulations require the franchisor to have at least 2 directly operated stores running 1 year or more. Within 15 days of the first franchise contract it must file with the commerce department; no filing: fine 10000–50000 yuan; still unfiled after the deadline: 50000–100000 yuan plus public notice. Before signing it must deliver written disclosure on 12 items—including fee types and amounts, deposit refund conditions, franchisee count and how stores are doing, audited report summaries for the last 2 years, and litigation and arbitration in the last 5 years. The contract must also state that the franchisee may unilaterally terminate within a period after signing. Concealment or false disclosure lets the franchisee cancel the contract (nationwide, from May 2007).
- Notes
- No filing, no disclosure file, or pay-before-reading contract: leave. «Cooling-off» is the post-signing window for unilateral exit; the regulation only says «a certain period», so get the day count written in. On disclosed average sales, gross, or net profit for existing franchisees, ask how the brand sourced the numbers—the rules require disclosure of sources. Schemes that skip «franchise» and only charge «store operations» or «opening training» fees: item 24.
Sources · 3
- 国务院 (2007). 商业特许经营管理条例（国务院令第 485 号，第七、八、十二、二十二、二十三、二十五条）. gov.cn/zhengce/zhengceku/2008-03/28/content_4…
- 商务部 (2012). 商业特许经营信息披露管理办法（商务部令 2012 年第 2 号，第五、九条）. gov.cn/gongbao/content/2012/content_2177025.htm
- 商务部. 商业特许经营信息管理系统. txjy.syggs.mofcom.gov.cn/