Fast Food Operators Face Risk Of Violating China's Franchise Operation Rule

Though there are only about 20 days left before China's deadline for registration, a number of food operators, including McDonald's, KFC, Quanjude and Yonho Soybean Milk, have reportedly not registered with the Ministry of Commerce as required, and this has put them at the risk of violating China's new Business Franchise Operation Management Rule.

China's Business Franchise Operation Management Rule was formally enacted on May 1, 2007 as a measure to restrict frequent franchise fraud. As a part of its core content, the Rule asks companies that are engaged in franchise operations to register with the commerce department within one year after its implementation. However, until now, only 236 companies have registered, according to local media and the Ministry of Commerce, which is less than one-tenth of the statistics showing 2006 possible companies that should register.

Why are companies avoiding registration? Perhaps because the law is meant to protect franchisees, the companies that oversee and sell the franchises want to extend their grace periods for as long as possible.

According to China's Business Franchise Operation Management Rule, franchise enterprises that do not register with the commerce department will be fined up to RMB100,000.