What Is Franchising?

Franchising has been expanding rapidly and low in recent years. cost Low risk and high efficiency The advantages in China have been greatly improved. Development Now, it has already involved many industries and fields such as retail, catering, clothing, apparel and so on. However, with the rapid development of franchising in China, the proportion of franchise contract disputes as a new type of case in commercial cases is also increasing year by year.

Franchising as a new business mode, its legal relationship is more complex. It is a package solution, including the intellectual property rights provided by franchisees, such as trademarks, trade names, know-how, training and technical support, franchisees' relative control rights, etc., but also regulated by the Ministry of Commerce specially formulated for this purpose. Because of this, the Supreme People's court, in the provisions of the case of civil cases formally implemented in April 1, 2008, deals with cases involving franchising, a new type of commercial conduct, and determines the cause of the case in the franchise contract dispute, and acts as the three level of the case of "disputes related to intellectual property rights". The introduction of this new case distinguishes franchising from other traditional business practices. However, how to identify franchising from complicated business behaviors has become a pressing problem at all levels of the court. In this article, the author tries to provide some help for readers from the analysis of the characteristics of the contract and the comparison of other confusing commercial contracts.

Legal characteristics of franchising

According to the "business franchise management measures" implemented by the Ministry of Commerce in February 1, 2005, franchising refers to enterprises that have operating resources such as registered trademarks, enterprise marks, patents, proprietary technology, etc. (hereinafter referred to as franchisees), in the form of contracts, authorize other operators (hereinafter referred to as franchisees) to use their own business resources, the franchisees carry out business under the unified mode of operation in accordance with the contract, and pay franchise fees to franchisees. The management of commercial franchise is the only normative document in China that specifically adjusts the legal relationship of franchising. Based on the above definition, we can know that franchising has the following legal characteristics:

(1) the qualification of franchisee is the precondition for the franchisee to sign the franchise contract with the franchisee (also known as the franchisee).

Therefore, franchisees must be qualified, that is, those who enjoy independent intellectual property rights or are entitled to authorize them. At the same time, the parties to franchising are independent legal entities who are self financing and at risk.

(two) the core of franchise is the granting of concession.

Franchise is a comprehensive right to use intellectual property, including trademarks, trade names, business models, service marks, patents, trade secrets, and know-how. Therefore, the content of franchise is the essential element of franchise contract.

(three) franchising requires the franchisee and franchisor to have common external characteristics.

That is to say, there must be provisions in the franchise contract to achieve the goal of "unified management mode". For example, the franchisee and franchisor achieve a high degree of unity in brand, quality, trademark and business philosophy, and are uniform in the organizational system, business mode and corporate image.

(four) the franchisee must pay the franchisee the corresponding franchise fee (also known as the franchise fee).

　 The franchise fee is the consideration that the franchisee obtains the franchise qualification, and the franchisee can enjoy the successful operation mode directly after paying the fee. Therefore, the franchise is different from the advance payment in the legal nature.

Therefore, if a business contract contains above four basic elements, we can identify it as a "franchise contract".