We have had many clients ask our China lawyers to recommend the best way to sale their products on the China market, while avoiding large capital investments and the time and costs of establishing a market presence and recruiting and training an effective work force. These clients simply want to sell their product in China in a fast and effective way. For these clients we suggest a franchise model.
China has substantially opened the franchising market since 2007. It is allowed by law and regulations for a foreign franchisor to establish a franchise in China utilizing its own registered trademarks, enterprise logos, patents, proprietary technologies or any other business resources licensed to a domestic franchisee in China. To become a qualified franchisor, the foreign enterprise shall present fully-developed business plan and must have the ability to provide operational guidance, technical support, and service training to the franchisee on continuous basis. Also, a franchisor shall have, as a minimum, two directly-managed overseas outlets, each with one year of business operation as so required by Chinese laws and regulations.
When conducting the franchising activities, a written franchising contract is concluded by the foreign franchisor and domestic franchisee. The foreign franchisor shall be responsible for completing the filing with local commerce authority within 15 days of their first conclusion of a franchising contract. Several additional legal documents must be have to be submitted to the authority for examination. Our China lawyers are experienced in preparation of the required documentation to avoid any delay in the process.
The franchise model may be designed either through a single unit franchising, a master franchising or an area development franchising. Each type of franchising has its unique advantages and disadvantages that an experienced China lawyer can easily explain. Our China lawyers may be of great assistance in advising the franchisor as to the best way to operate franchising according to the franchisor’s cost budget, risk tolerance power and other factors. Also, the China lawyers will be essential in developing a plan to protect the franchisor’s IP rights, commercial secrets and other intangible assets in the course of franchising operation.