Check the Ministry of Commerce records before signing; obtain written disclosures and include a “cooling-off period” in the contract

5. Check the Ministry of Commerce records before signing; obtain written disclosures and include a “cooling-off period” in the contract

Cost: There is no cost involved. Simply visit the Ministry of Commerce’s “Franchise Information Management System” website to verify whether the brand has been registered. Then ask the franchisor to provide you with written disclosures covering all required details prior to signing, along with the contract itself. This whole process takes just a few hours.

In plain terms: By law, a franchisor must first operate at least two company-owned stores for a full year, and must register those stores with the Ministry of Commerce within 15 days after signing the franchise agreement. Before signing, it must also furnish you with written disclosures on 12 specific topics, including franchise fees, refund policies for deposits, and the profitability of existing stores. If a brand fails to register, refuses to provide these disclosures, or demands payment before letting you see the contract, you should walk away immediately.

Benefit: Legal requirements mandate that any franchisor maintain at least two company-owned stores that have been operating for at least one year. Within 15 days of signing the franchise contract, it must register those stores with the relevant authorities; failure to do so results in fines ranging from 10,000 to 50,000 yuan. If registration is delayed further, fines rise to 50,000–100,000 yuan and the violation is publicly announced. Prior to signing, the franchisor must provide you with written disclosures on 12 mandatory topics, such as exact fee structures, conditions under which deposits are refundable, current franchisee numbers and their financial performance, summaries of audited financial statements from the past two years, and any past litigation or arbitration involving the brand. The contract must also explicitly state that franchisees may unilaterally terminate the agreement within a defined “cooling-off period” following signing. Should the franchisor conceal any facts or provide false information, franchisees retain the right to void the contract (effective nationwide since May 2007).

Evidence grade: A

Sources: State Council of China (2007). Commercial Franchise Management Regulations (State Council of China Order No. 485, Articles 7, 8, 12, 22, 23, 25). <https://www.gov.cn/zhengce/zhengceku/2008-03/28/content_4179.htm>; Ministry of Commerce (2012). Regulations for the Administration of Commercial Franchise Information Disclosure (Ministry of Commerce Order No. 2, 2012, Article 5, Article 9). <http://www.gov.cn/gongbao/content/2012/content_2177025.htm>; Ministry of Commerce. Commercial Franchise Information Management System. <https://txjy.syggs.mofcom.gov.cn/>

Notes: If a brand cannot be verified via the registration database, refuses to provide required disclosures, or insists on payment before contract review, you should avoid it entirely. The “cooling-off period” refers to the specific window after signing during which franchisees may withdraw from the agreement unilaterally; this duration must be explicitly stated in the contract, as regulations only prescribe that it must be “a reasonable period.” When reviewing any disclosed figures regarding average sales, gross profit, or net profit among existing franchisees, always ask the brand to substantiate their sources, as regulations require them to disclose such data transparently.