China issues new franchising rules

BEIJING (Xinhua) - China has issued new franchising rules to regulate both domestic and foreign operators, effective from Feb 1.

Franchisers who have been operating in the country with at least two retail outlets for more than a year are allowed to sign up franchisees, set quality standards for their goods and services, and collect franchise fees, the Ministry of Commerce said in a statement posted on its website.

They can also revoke the licenses of franchisees that have violated contracts, but cannot force upon franchisees goods not related to their daily operations, the ministry said.

Meanwhile, franchisers must disclose detailed financial information -- including the size of their registered capital, audited financial reports and tax claims -- and are banned from running 'deceitful' commercials.

The ministry will also require foreign franchisers to submit all franchising contracts signed in the previous year to the government and abide by the rules governing foreign investors.