In China, the franchise specific legislation regulates the franchise disclosure and franchise registration. The Chinese Ministry of Commerce (“MOFCOM”) has amended the provisions related to disclosure and registration. The most important changes has listed as follows:
On registration, regarding to “2+1” rule, a number of improvements has been introduced. The most important improvement is the acknowledgement that stores operated by an affiliate of the franchisor now count towards the requirement to have two directly operated stores; Franchisors engaged primarily in on-line or catalogue sales and distance learning are exempted from the “2+1” rule.
On disclosure, the obligation to disclose supplies and services provided by Affiliates has been widened and the list of disclosure items has been revised; a positive development is the new obligation of a potential franchisee to keep a franchisor’s business secrets confidential irrespective of whether a confidentiality agreement was signed.