Friday, February 16, 2007

Franchise Association Hails China’s New Regulation

China’s new franchise regulation has been praised by the International Franchise Association (IFA) as a significant improvement over earlier proposals. According to the IFA, the new regulation "came about as a result of intensive efforts by the International Franchise Association to build strong relations with the Chinese government.” The association’s leadership “made extensive presentations . . . to support the case for a more tolerable regulatory regime.”

The U.S franchise association cites the following achievements in the rulemaking process:

■ The elimination of a proposed provision that would have imposed liability on franchisors for loss caused by the products or services of suppliers designated by the franchisor, even in the absence of any financial relationship between the franchisor and the supplier.

■ The imposition of a “notice filing” form of franchise registration rather than an “approval” process.

■ The elimination of the requirement that franchisors operate at least two company-owned units in China for at least one year prior to offering franchises. The “in China” requirement was dropped.

The global community of franchising should be encouraged by these steps,” said IFA President Matthew Shay.

The Washington, D.C.-based organization will now address the upcoming Implementation Guidelines “to ensure that those hard-won gains will not be lost,” observed David French, IFA Vice President of Government Relations. “We welcome comments from all segments of the franchising world as we formulate our own thinking and strategy in that regard.”

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