CHINA Law and Practice Contributed by: Qiang Ma and Yan Feng Liu, Jingtian & Gongcheng
franchisor, the basic information of the affiliated company shall be disclosed, and the franchisor shall simultaneously specify how to deal with the franchised business operation system once the contract on authorisation to the affiliated company is cancelled; and (c) information about any lawsuits or arbitrations involving the franchisor’s (and/or its affiliated companies’) business resources, such as reg - istered trade marks, enterprise marks, patents and know-how. • Details of all franchise fees, their purpose and pay - ment methods. (a) The variety, amount, rates and terms of pay - ment of the fees which the franchisor charges and charges in lieu of the third party; if the aforesaid matters cannot be disclosed, an explanation shall be made; if there is no uni - form criterion for the fee charge, the highest and lowest rates shall be disclosed and an explanation shall be made. (b) The conditions for collection and refund of security, as well as when and how to refund the security. (c) If the franchisees are required to pay the fees before a franchise contract is concluded, a written statement indicating their purposes and under what conditions – and how – such fees shall be refunded to the franchisee. • Information on the prices and conditions for pro - viding products, services and equipment: (a) whether or not the franchisees must buy prod - ucts, services or equipment from the franchisor (or its affiliated company or companies) as well as the relevant prices, conditions, etc; (b) whether the franchisees must buy products, services or equipment from the supplier(s) des - ignated (or permitted) by the franchisor; (c) whether or not the franchisees are allowed to choose other suppliers, as well as the require - ments for those suppliers. • Details of the support services offered to the fran - chisee (eg, training or technical support): (a) the specific contents, terms of provision and execution plan of business training, including where, when and how long the training is to be held; and (b) the specific contents of technical support,
describing the table of contents of the brochure of franchised operations and the corresponding number of pages. • Information on the franchisee’s operational require - ments and standards: (a) the form and content of guidance and super - vision conducted by the franchisor on the business operations of the franchisees, the obligations that the franchise must perform, and the consequences of any franchisee’s non- performance of its obligations; and (b) whether the franchisor will bear joint and several liabilities for the complaints of – and be responsible for compensating – the consumers, and how to bear such liabilities. • Information about the investment budget for the franchise outlets. (a) The investment budget may cover expens - es including membership fees; training fees; expenses for real estate and decora - tion; expenses for purchasing equipment, office supplies, furniture, etc; initial inven - tory; expenses for water, electricity and gas; expenses for obtaining any necessary licence and other government approvals; and working capital. (b) The sources of and an estimated basis for the aforesaid data on expenses. • Relevant information about the franchisees within the territory of China. (a) The existing and expected number of fran - chisees, distribution areas, scope of authorisa - tion, whether or not there is any solely author- ised area (if any, the expected concrete scope shall be indicated). (b) Information about the evaluation of the busi - ness status of the franchisees. The franchisor shall disclose franchisee information such as their actual or expected average sales vol - ume, gross profits and net profits, and shall simultaneously state the sources and length of time of the aforesaid information as well as the franchise outlets involved; if the informa - tion is estimated, the franchisor shall give the estimation basis and shall expressly state that the actual business operations are likely to be different from the estimates.
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