The evolution of franchising in the Chinese courts : the qualifications for a franchisor and the application of the disclosure requirements

Franchising, a business concept developed in the US in 1950s has captured the opportunity to develop in China since 1990s. With the Interim Franchise Measures issued in 1997, China was one of the first few countries with a franchise specific regulation. However, it was not until the coming into force of the Commercial Franchise Administration Regulation in 2007, the volume of franchise cases has steadily risen. This paper examines the evolution in the way the Chinese courts have handled franchise disputes. It firstly compares the provisions of the 2005 Measures and the 2007 Regulation. It also briefly discussed how the Chinese law is similar to or different from the franchising specific laws in other countries. It analyses the decision of the selected cases in the Beijing courts and discuss the change of interpretation of law by the courts, from having the courts make an administrative decision as to whether a corporation meets the qualifications to be a franchisor, the courts now make a decision as to whether the contract was properly and fairly formed by the making of the required disclosures.