Together with the booming development of the commercial franchise industry in China, various legal risks in franchise are also oncoming. In the face of these risks, it becomes a key lesson for franchise participants as to how to enhance the awareness and capability of preventing and dissolving these risks. In this situation, the September W&B China Law Salon invited our Partner, Mr. William Zhou, to give a lecture on the said risks in franchise and the advisable countermeasures based on his practical experience in this field.

First of all, Mr. Zhou provided a summary of the development history of commercial franchise industry, along with the reasons for era iterations during the process. Combining the development history of commercial franchise industry in Mainland China and the corresponding legislative developments, Mr. Zhou shared his thoughts on regulation of commercial franchise activities and stabilization of the market and economic environment.

Following that Mr. Zhou provided data and diagrams reflecting “increase in franchise cases in Shanghai”, “jurisdiction over franchise cases in Shanghai” and “industry distribution involved in franchise cases in Shanghai”, and explained about the current situation with a combination of case briefs. Through interpretations of the relevant data of the commercial franchise industry, Mr. Zhou said that although currently commercial franchise was still a very popular business model, the existing problems therein should in no event be ignored. For example, the parties of commercial franchise might lack professional and correct understanding of the legal risks underlying in their franchise activities, in view of which he decided to share this lecture with the attendees.

Then Mr. Zhou elaborated on frequently occurring issues in disputes over franchise contracts and the related judicial adjudication guidance. For example, he explained about the differences between trademark licensing contracts and commercial franchise contracts, legal risks in defining the nature of the signed contracts, and rescission of contracts during the cooling-off period.

Finally Mr. Zhou sorted out the issues triggering legal risks in commercial franchise industry. He explained about the common situations and legal consequences in terms of the legal risks related to the identities of the franchise activity participants. He also provided suggestions on risk prevention in terms of the nature definition of the signed written contracts, e.g. clarifying the parties’ rights and obligations under the contracts, or formulating customized franchise contract templates that are tailored to the actual needs. In addition, Mr. Zhou also shared some advisable remedial measures and reminded the franchise participants of the issues requiring their full attention.