Editing Franchising (section)

===China===
China has the most franchises in the world but the scale of their operations is relatively small. The average franchise system in China has about 45 outlets, compared to more than 540 in the United States. Together, there are 2600 brands in some 200,000 retail markets{{clarify|reason=the meaning of 'retail market' here is not clear|date=November 2020}}. KFC was the most significant foreign entry in 1987 and is widespread.<ref name="FIC">{{Cite web |url=http://www.franchise.org/uploadedFiles/Franchise_Industry/International_Development/franchising%20in%20China.pdf |title=Franchising in China |access-date=2010-03-06 |archive-date=2010-12-14 |archive-url=https://web.archive.org/web/20101214152311/http://www.franchise.org/uploadedFiles/Franchise_Industry/International_Development/franchising%20in%20China.pdf |url-status=dead }} ''Franchise.org''</ref> Many franchises are in fact joint-ventures, as at their forming the franchise law was not explicit. For example, [[McDonald's]] is a joint venture. [[Pizza Hut]], [[T.G.I. Friday's|TGIF]], [[Walmart|Wal-mart]], [[Starbucks]] followed not long thereafter. But total franchising is only 3% of retail trade, which seeks foreign franchise growth.

The year 2005 saw the birth of an updated franchise law,<ref name=FIC/> "Measures for the Administration of Commercial Franchise".<ref>[http://www.pfa.org.ph/images/stories/PFA/PDF/chinafranchiseregulations.pdf]{{dead link|date=October 2017|bot=InternetArchiveBot|fix-attempted=yes}}</ref> Previous legislation (1997) made no specific inclusion of foreign investors. Further updates were made in 2007, with the objective of increased clarity of the law.{{citation needed|date=November 2020}}

The laws are applicable if there are transactions involving a trademark combined with payments with many obligations on the franchisor. The law comprises 42 articles and eight chapters.

Among the franchisor obligations are:
* The FIE (foreign-invested enterprise) franchisor must be registered by the regulator
* The franchisor (or its subsidiary) must have operated at least two company-owned franchises in China (revised to "anywhere") for more than 12 months ("the two-shop, one-year" rule)
* The franchisor must disclose any information requested by the franchisee
* Cross-border franchising, with some caveats, is possible (2007 law).

The franchisor must meet a list of requirements for registration, among which are:
* The standard franchise agreement, working manual and working capital requirements,
* A track-record of operations, and ample ability to supply materials,
* The ability to train the Chinese personnel and provide long-term operational guidance,
* The franchise agreement must have a minimum three-year term.

Among other provisions:
* The franchisor is liable for certain actions of its suppliers
* Monetary and other penalties apply for infractions of the regulations.

The disclosure must take place 20 days in advance. It has to contain:
* Details of the franchisor's experience in the franchised business with scope of business
* Identification of the franchisor's principal officers
* Litigation of the franchisor during the past five years
* Full details about all franchise fees
* The amount of a franchisee's initial investment
* A list of the goods or services the franchisor can supply, and the terms of supply
* The training franchisees will receive
* Information about the trademarks, including registration, usage and litigation
* Demonstration of the franchisor's capabilities to provide training and guidance
* Statistics about existing units, including number, locations and operational results, and the percentage of franchises that have been terminated, and
* An audited financial report and tax information (for an unspecified period of time).

Other elements of this legislation are:
* The franchisee's confidentiality obligations continue indefinitely after termination or expiration of the franchise agreement
* If the franchisee has paid a deposit to the franchisor, it must be refunded on termination of the franchise agreement; upon termination, the franchisee is prohibited from continuing to use the franchisor's marks.