Franchising is a method for business expansion and distribution of services and goods through a licensing relationship. A franchisor in China is a person or company that gives the license to conduct a business under its marks to a third party. It specifies the products and services that are offered by the franchisee (a person or company who has the license to do business under the franchisor’s trademark and trade name). In addition, the franchisor provides it with a brand, an operating system and support.
If you are interested in how to set up a franchise in China, please contact our Chinese law firm.
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Types of franchising in China
In order to succeed in the Chinese market, the key way is to enter one of the major cities, using company-owned stores that are useful for the franchisor in order to gain familiarity with the economic, cultural and legal environments. A foreign investor must know that, for most of the business types of companies, a minimum registered capital between RMB 100,000 ~ RMB 500,000 is required.
Here are some successful types of Chinese franchises:
– joint venture – A limited liability company in which both partners invest and manage operations through a board of directors. In this business, partners share the profits/losses according to their investment;
– wholly foreign owned enterprises – Foreign investor provides all capital and has full control over the enterprise’s operations;
– master franchising –The foreign franchiser has to decide on finding the right local partner and to use the appropriate entry structure.
Our attorneys in China can offer you assistance in choosing the proper type of franchise in China.
Procedures for Franchise Registration in China
Both franchisor and franchisee have to provide several copies and documents that prove the legal entity of their companies and business relationships. Chinese partner will provide copies of papers such as: its partner’s local company business license, certified public accountant firm’s capital verification report, its partner’s last year audit report etc.
On the other hand, foreign partner provides copies of the following: certificate of incorporation, bank reference letters from investor’s bank to declare a good standing, registered capital and business scope etc.
For complete guidance in regard to all the documents needed to set up a franchise in China, our Chinese law firm will help.
Investors in China should bear in mind that foreign companies must have contact with a PRC entity that is authorized or permitted by relevant authorities to act as an agent that will submit all the documents for the examination and approval on behalf of the foreign enterprise.
Our lawyers in China will offer detailed information on all the documents needed in order to register the franchise.
Depending on the company type you decide to set up in China, here are the most frequent needed documents for the registration:
• name registration, business license with State Administration of Industry and Commerce;
• certificate of approval by Ministry Of Commerce or Foreign Economical Cooperation Bureau;
• tax certificate by tax bureau;
• open foreign currency and RMB bank account;
• registration and approval with State Administration of Foreign Exchange;
• capital verification report by certified public accountant;
• statistics license registration;
• financial certificate registration etc.
Even though it might look like a difficult and resourceful process, our lawyers in China can help foreign investors and offer support in completing the steps on setting up a franchise in China.
Please contact our Chinese law firm for more detailed information.