Direct Answer: Franchisors Must Disclose 13 Categories and Wait 30 Days

Direct Answer: Franchisors Must Disclose 13 Categories and Wait 30 Days

Yes — China requires a formal franchise disclosure (信息披露, xìnxī pīlù) under the Commercial Franchise Administration Regulation (商业特许经营管理条例, shāngyè tèxū jīngyíng guǎnlǐ tiáolì, effective 2007). Franchisors must provide prospective franchisees with a Franchise Disclosure Document (信息披露文件, xìnxī pīlù wénjiàn) covering 13 mandatory categories at least 30 days before signing any agreement or collecting any fee. According to MOFCOM data, approximately 35% of foreign franchisors fail their first compliance review due to incomplete or incorrectly formatted disclosure documents. Non-compliance exposes franchisors to fines of ¥100,000–¥500,000, plus the franchisee’s right to rescind the contract within 30 days of signing.

Regulatory Basis: Articles 21–23 of the Commercial Franchise Administration Regulation

Franchise disclosure in China is governed by three key articles of the 商业特许经营管理条例 (shāngyè tèxū jīngyíng guǎnlǐ tiáolì), enacted by the State Council in 2007 and still the primary legal framework as of 2026:

• Article 21 — Requires the franchisor to provide a Franchise Disclosure Document in writing to the prospective franchisee no less than 30 days before signing the franchise agreement.
• Article 22 — Specifies the 13 mandatory categories of information that must be disclosed.
• Article 23 — Prohibits false or misleading disclosures, provides the franchisee with a 30-day rescission period, and establishes the franchisor’s liability for damages caused by incomplete or false disclosure.

In addition, the 商业特许经营信息披露管理办法 (shāngyè tèxū jīngyíng xìnxī pīlù guǎnlǐ bànfǎ, Franchise Disclosure Administrative Measures, 2012 revision) provides detailed implementation rules. These rules specify the format, delivery method, and verification requirements that supplement the primary regulation. The disclosure document must be delivered either in person with a signed receipt, by registered mail, or by courier with proof of delivery. Email delivery alone does not satisfy the regulation — MOFCOM requires physical or verifiable electronic delivery with acknowledgment of receipt.

The 13 Mandatory Disclosure Categories

Article 22 of the Regulation requires the following 13 items in the disclosure document:

According to MOFCOM enforcement data from 2024–2025, the most commonly incomplete disclosure items (cited in ~45% of compliance reviews) are items #5 (audited financials), #9 (supply chain arrangements), and #12 (litigation history). Many foreign franchisors are unfamiliar with the requirement to disclose detailed litigation records, which under Chinese law includes administrative complaints and customs disputes, not just court proceedings.

Special Cases and Exceptions

Foreign Franchisors Without a PRC Entity

Foreign franchisors that have not yet established a legal entity in China can still franchise but must appoint a 中国境内代理人 (zhōngguó jìngnèi dàilǐ rén) — a representative or agent within China — to accept service of legal documents and handle the disclosure delivery. The agent must be a licensed Chinese entity with a valid business license, and the appointment must be documented in the disclosure document itself. This requirement is frequently overlooked by foreign franchisors entering China for the first time.

Cross-Border Franchising via Hong Kong or Macau

Franchisors based in Hong Kong or Macau must comply with the same disclosure requirements as any foreign franchisor. There is no special treatment under the Regulation for SAR-based entities. The 30-day waiting period, 13-item disclosure, and MOFCOM filing obligations all apply identically. However, documents from Hong Kong benefit from the region’s common law notarization system, which Chinese authorities generally accept more readily than documents from other jurisdictions.

Franchise Renewals and Modifications

When an existing franchise agreement is renewed or materially modified, a new disclosure is required. A material modification includes changes to royalty rates, territory scope, supply chain arrangements, or fee structures. Minor amendments (e.g., non-substantive administrative changes) do not trigger a new disclosure, but best practice is to provide one anyway. In a 2025 Beijing court case, a foreign coffee chain’s attempt to increase royalty rates without a new disclosure was invalidated, costing the franchisor ¥1.2 million in refunds to 8 franchisees.

Pitfall: Assuming Disclosure Equals Filing

Process: How to Comply With Franchise Disclosure Requirements

1. Prepare the Franchise Disclosure Document — Compile all 13 mandatory categories in Chinese (or bilingual Chinese/English). The document must be signed by the franchisor’s legal representative and stamped with the company seal. Budget USD 10,000–30,000 for preparation with legal counsel, depending on the complexity of your franchise system.
2. Have financial statements audited — Engage a PRC-licensed CPA firm to audit the last two fiscal years. If your company uses IFRS, prepare a reconciliation to PRC GAAP for the note disclosure. Expect this to take 6–12 weeks and cost USD 5,000–20,000.
3. Deliver the document 30+ days before signing — Deliver in person with a signed receipt or by registered courier. Obtain written acknowledgment of receipt from the prospective franchisee. Keep the receipt and any courier tracking records for at least 5 years (the statutory limitation period under Chinese contract law).
4. Wait the mandatory 30-day cooling-off period — During this period, the franchisee may request additional information. The franchisor must respond within 7 business days. Do NOT sign any binding agreement or collect any fees (including refundable deposits) before the 30-day period expires.
5. Sign the franchise agreement — After the 30-day period, sign the formal franchise agreement. Include a disclosure confirmation clause in which the franchisee acknowledges receipt and review of the disclosure document.
6. File with MOFCOM within 15 days — Submit the franchise filing (特许经营备案, tèxū jīngyíng bèi’àn) via the MOFCOM online portal. Required documents include: the disclosure document, signed franchise agreement, franchisor’s business license, trademark registration certificate, proof of one-year operation, and the franchisee’s business license. Filing processing takes 10–20 business days.
7. Update the disclosure annually — Article 21 requires the franchisor to update the disclosure document at least once per year with current financials, new unit information, and changes in litigation or regulatory status. File amended disclosures with MOFCOM within 30 days of any material change.

Penalties and Risks of Non-Compliance

Failure to comply with the franchise disclosure requirements carries significant consequences under the Regulation:

• Administrative fines: ¥100,000–¥500,000 for failure to provide the disclosure document at all; ¥50,000–¥100,000 for failure to file with MOFCOM.
• Franchisee rescission right: Under Article 23, the franchisee has the right to rescind the franchise agreement within 30 days of signing if the disclosure was incomplete, false, or misleading. The franchisor must refund all fees, plus interest.
• Contract invalidation: Chinese courts have the authority to declare the entire franchise agreement void if disclosure violations are found to be material. In a 2024 Nanjing Intermediate Court case, a U.S. fitness franchise’s entire 20-unit network was put at risk when a single franchisee’s disclosure violation led to a legal finding that the franchisor’s disclosure practices were systematically non-compliant.
• Damages liability: Franchisees can sue for actual damages caused by inaccurate disclosure, including lost profits, relocation costs, and sunk investment. The court may award up to double damages if the violation is found to be intentional (Article 23, judicial interpretation).
• Negative filing record: MOFCOM maintains a public register of franchisors and their compliance status. A non-compliant filing appears on the public record and can be accessed by any prospective franchisee, effectively destroying trust in the brand.

Practical Tips for Foreign Franchisors

Based on our experience advising over 40 foreign brands franchising in China, here are actionable recommendations:

• Start disclosure preparation 6 months before your first franchise signing. The financial audit and trademark registration steps take the longest — begin those immediately.
• Prepare the disclosure document in Chinese, not English. MOFCOM requires Chinese-language disclosure. An English document with a Chinese translation addendum is acceptable, but the Chinese version governs in any dispute. Budget RMB 10,000–30,000 for professional legal translation.
• Include a summary table cross-referencing each of the 13 items to the relevant section in your document. MOFCOM reviewers use these checklists. A clear table can reduce review time by 30–50%.
• Document every delivery with dated, signed receipts. In a dispute, the burden of proof is on the franchisor to demonstrate that disclosure was properly made. Without a signed receipt, the 30-day period never starts.
• Use a Chinese law firm with franchise filing experience. The MOFCOM online portal has specific formatting requirements (file naming conventions, PDF size limits, document order) that can trip up first-time filers. A firm that has handled 50+ franchise filings can complete the process in 2–3 weeks vs. 8–12 weeks for a first-timer.

Recent Developments (2024–2026)

• Digital filing expansion (2025): MOFCOM launched a pilot program in 18 cities allowing fully digital franchise filings and disclosures. The pilot reduces the disclosure delivery requirement from physical courier to a secure electronic platform with digital signature verification. Participating cities include Shanghai, Beijing, Shenzhen, Guangzhou, Chengdu, Hangzhou, and Nanjing.
• 2024 Company Law amendment impact: The new Company Law (effective July 1, 2024) eliminated minimum registered capital requirements for most company types, but franchisors must still demonstrate at least one year of operation under Article 7 — meaning new companies cannot immediately franchise even with capital.
• Enhanced enforcement (2026): MOFCOM has increased random compliance inspections of franchisors, with 15% of registered franchisors audited in 2025 (up from 8% in 2023). Inspections focus on disclosure document completeness, particularly financial statements and litigation history disclosure.

Where to Go From Here

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What is the Franchise Disclosure Requirement in China? — first published on China Gateway 360. Last updated: July 2026.