On February 1, 2012, amendments to China’s Commercial Franchise Registration Administrative Measures will become effective, clarifying the 2007 Measures. Among the clarifications in the 2011 Measures are:
- Foreign franchisors must register with the Chinese Ministry of Commerce (MOFCOM) in Beijing, not one of the provincial Commerce Ministries.
- Amendments to registrations must be filed when Chinese company registration information for the franchisor changes, when a change in the status of the franchisor’s intellectual property rights occurs, and when a change in the number, geographic distribution, territorial rights, gross sales, and profitability of franchised outlets occurs. The revised Measures do not articulate a materiality standard.
The two-plus-one rule, requiring franchisors to have at least two company-owned outlets in operation for at least one year before beginning franchising, has not been changed.
According to our colleagues at the Jun He law firm in Beijing, more substantive revisions to the Franchise Regulations are being prepared.