The existing legislation on commercial franchising in China mainly includes the Administrative Regulations on Commercial Franchising (which were implemented as of May 1, 2007, hereinafter referred to as the Regulations) formulated by the State Council1. The Regulations not only apply to activities related to franchising of foreign enterprises or foreign invested enterprises, but also apply to Chinese enterprises with domestic investment.
The Regulations were formulated mainly for the purpose of normalizing franchisors activities from the administrative perspective, as a result, in addition to stipulating the franchisors eligibility factors, the obligation of information disclosure, the main contents contained in commercial franchising contracts and the obligation of filing the commercial franchising contracts, the Regulations also stipulate that obligor shall bear administrative penalties such as imposition of a fine if the obligor breaches the aforesaid obligations. However, the Regulations did not include stipulations on the legal validity of contracts when breaching the aforesaid contents.
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