Franchising | Performance of Franchisor's Training Obligations and Risk Prevention
Published:
2024-07-31
Articles 7 and 14 of the Regulations on the Administration of Commercial Franchising both stipulate that training is a legal obligation of the franchisor and an important means to achieve the purpose of franchising. Disputes arising from the franchisor's training obligation often occur, how the franchisor should fulfill the training obligation, what is the risk of not fulfilling the obligation, and how the franchisor carries out risk prevention, this paper elaborates on this.
Commercial franchising is the franchisor's mature business model of continuous "copy", how to ensure the success of "copy", the franchisor's training is an indispensable important link. Articles 7 and 14 of the Regulations on the Administration of Commercial Franchising both stipulate that training is a legal obligation of the franchisor and an important means to achieve the purpose of franchising. Disputes arising from the franchisor's training obligation often occur, how the franchisor should fulfill the training obligation, what is the risk of not fulfilling the obligation, and how the franchisor carries out risk prevention, this paper elaborates on this.
Causes of disputes arising from 1. training obligations
1, the terms of the contract does not clearly agree on the content of training and performance methods.
Article 11 of the Regulations on the Administration of Commercial Franchising stipulates that the franchise contract shall include the provisions of "the specific content and manner of provision of services such as business guidance, technical support and business training. However, many franchise contracts are not clear about the agreement on training matters, resulting in disputes in the performance of the contract.
2, the franchisor did not fulfill the training obligations or failed to perform in a comprehensive and timely manner.
When the franchisor fulfills the training obligation, some are too perfunctory and mere formality, some only through the issuance of brochures or video materials, and some do not pay attention to the individual differences of the franchisee for targeted practical training, resulting in the franchisee does not really grasp the business model of the franchisor. When the franchisee loses money due to mismanagement, the franchisor is often held liable on the grounds that the franchisor has not fulfilled its training obligations.
3. The franchisor fails to keep valid evidence when fulfilling its training obligations.
In practice, some franchisors have indeed fulfilled their training obligations, but they have failed to retain evidence, which has led to disputes over their claims that they have fulfilled their training obligations without valid evidence.
Consequences of 2. Franchisor's Failure to Fulfill Training Obligations
1, fundamental breach of contract, the termination of the contract.
The franchise contract is terminated when the franchisor fails to perform its training obligations, which constitutes a fundamental breach of contract, resulting in the failure to achieve the purpose of the contract.
The Intermediate People's Court of Jinan City, Shandong Province (2022) Lu 01 Civil Judgment No. 989 determined that the franchisor's performance of training and guidance obligations is the basic condition for the franchisee to carry out business smoothly. At the same time, taking into account the fact that there is an inequality between the franchisor and the franchisee in mastering information such as industry conditions, business processes and precautions, the franchisor, as a party with more market information, should actively fulfill its obligations. Therefore, after the signing of the contract involved, Jinan * * company has not fulfilled its training and guidance obligations, resulting in Xiamen * * * company unable to carry out business, has constituted a fundamental breach of contract, Xiamen * * * company has the right to terminate the contract.
2, general breach of contract, does not necessarily lead to the termination of the contract.
Although the franchisor has not fully fulfilled the training obligations, but does not constitute a fundamental breach of contract, will not have the consequences of the termination of the contract.
The Intermediate People's Court of Xi 'an City, Shaanxi Province (2021) Shaanxi 01 Zhimin Chu No. 1321 Civil Judgment found that the plaintiff claimed that the defendant failed to perform the consultation twice a month as agreed in the contract, causing it to be unable to continue its business, so it demanded to terminate the contract. The defendant's failure to perform the training obligations does not necessarily lead to the failure of the purpose of the contract, nor is it an inevitable factor for the plaintiff to change its brand and business license and stop performing the contract involved.
3. Liability for breach of contract
If the franchisor fails to fulfill its training obligations, the franchisor may be liable for breach of contract, regardless of whether it leads to the consequences of the termination of the contract.
The People's Court of Baiyun District, Guangzhou City, Guangdong Province (2022) Yue 0111 Min Chu Civil Judgment No. 26896 found that one of the important ways for the plaintiff to obtain the operating resources of the original company is through the guidance and training services provided by the original company. There is no evidence to prove that the original company has provided guidance and training services to the plaintiff in accordance with the contract, which should be an important reason for the plaintiff's inability to perform the contract. Therefore, the defendant's actions constitute a breach of contract. The breach of contract by the original company is an important reason why the contract involved cannot continue to be performed, and the Court supports the plaintiff's claim that the original company should pay the breach of contract in accordance with the contract.
Chongqing No.1 Intermediate People's Court (2018) Yu 01 Min Zhong No. 467 Civil Judgment held that the purpose of training and management guidance is to enable Cheng Xiang to operate the franchise stores normally. Now Cheng Xiang has been operating the stores involved normally for more than two years. Therefore, it is believed that the above-mentioned behavior of the purchasable company cannot be established. The franchise contract stipulates that the purchasable company has the obligation of follow-up training and continuous training, and the purchasable company cannot prove that it has conducted follow-up training or continuous training to Cheng Xiang, and it shall bear the legal consequences of not being able to provide evidence. The behavior of the purchasers has constituted a breach of contract and should pay liquidated damages to Cheng Xiang. Therefore, the court of first instance supported Cheng Xiang's claim that the purchasers should pay liquidated damages of 50000 yuan.
The People's Court of Chancheng District, Foshan City, Guangdong Province (2020) Civil Judgment No. 1378 of the People's Republic of 0604, Guangdong Province, found that the plaintiff claimed that the defendant constituted a breach of contract and requested the termination of the contract involved only one of the reasons why the defendant failed to perform its training obligations. However, the main purpose of the establishment of the contractual relationship between the two parties and the establishment of the plaintiff's store was to sell ceramic tile products provided by the defendant for profit, and the defendant, and the defendant, the plaintiff failed to prove that the defendant's failure to perform training obligations has led to its inability to achieve the purpose of the contract, so its request to terminate the contract based on this lack of factual basis, the court will not support. Because the defendant has not fulfilled the training obligations of the breach of contract, so the plaintiff's demand that the defendant pay the breach of contract has a contractual and factual basis, should be supported.
The burden of proof 3. whether the training obligation is fulfilled.
The second paragraph of Article 5 of the "Several Provisions of the Supreme People's Court on Evidence in Civil Litigation" (2001) before the amendment stipulates that "if there is a dispute over the performance of the contract, the party with the obligation to perform shall bear the burden of proof." According to this article, if the parties to the franchise contract dispute whether the franchisor has fulfilled the training obligation, the franchisor shall bear the burden of proof, but the clause was deleted in the 2019 amendment.
Article 90 of the Judicial Interpretation of the Civil Procedure Law stipulates that the parties shall provide evidence to prove the facts on which their claims are based or the facts on which the other party's claims are based, unless otherwise provided by law. According to this provision, if the franchisor refutes the franchisee's claim that it has not fulfilled its training obligations, it shall bear the burden of proof. In judicial practice, it is also generally required that the franchisor bear the burden of proof for the performance of the training obligation, and bear the legal consequences of the failure to prove.
Beijing Fengtai District People's Court (2022) Beijing 0106 Minchu No. 2619 Civil Judgment determined that Dingtaihe Company should actively perform relevant contractual obligations such as providing technical practical training to the franchisee in accordance with the contract. At present, Dingtaihe Company has not provided any evidence to prove that it has performed or required Chen Guomei to perform the training and other related obligations stipulated in the contract involved in the case, nor has it promoted the location and training of Chen Guomei's store, which has exceeded the reasonable time limit for performing the contract involved in the case, resulting in the failure to realize the fundamental purpose of the contract involved, constituting a fundamental breach of contract. Chen Guomei has the right to terminate the contract involved in the contract.
The Intermediate People's Court of Huizhou City, Guangdong Province (2020) Civil Judgment No. 9795 of Yue 13 Min Zhong held that the plaintiff Mark Xuan believed that the defendant's residence renovation company had not fulfilled its training obligations and had committed a fundamental breach of contract. According to the WeChat screenshots submitted by the defendant's residence renovation company, it did push relevant training notice and video courses in the franchisee's WeChat group, and set up an online training studio to carry out relevant training and learning. Based on the cause of the new crown epidemic, the defendant house renovation company through the network online way to carry out training business, in line with the actual situation needs. Plaintiff Mark Xuan believed that the training content did not meet the requirements and did not continue to participate in the training voluntarily. This was because Plaintiff Mark Xuan voluntarily gave up the training and study. Therefore, according to the evidentiary materials submitted by the parties, the defendant's house renovation company has fulfilled its training obligations in a normal and reasonable manner.
The Intermediate People's Court of Foshan City, Guangdong Province (2021) Yue 06 Min Zhong No. 8314 Civil Judgment found that Article 5-2 of the contract involved stipulates: "Party A shall provide professional and standardized systematic training to Party B's employees and train 1-2 personnel designated by Party B." A company's so-called Huang Jiaxin office has someone to train the visitors and provide a U disk, which does not belong to the "professional and standardized systematic training" agreed upon above. Moreover, a company has failed to prove the claim. It should bear the adverse consequences of failing to prove the claim, and it is determined that a company has not fulfilled the above obligations, which constitutes a breach of contract.
Risk Prevention of 4. Franchisor
1, the establishment of a complete internal training institutions and systems.
The franchisor shall establish a special training institution and system to promote the mature business model and provide support for the performance of training obligations.
2. Set up a complete training course
The franchisor should set up training courses according to the characteristics of the business model and the content of the business resources, so that the franchisee can be proficient in franchising activities as soon as possible through the training of the corresponding courses and achieve profitability.
3. Preservation of effective evidence of the fulfillment of training obligations
Some franchisors have indeed fulfilled their training obligations, but due to irregular management or lack of legal awareness, they have not preserved relevant evidence, which has led to the adverse consequences of failing to provide evidence in litigation. The franchisor should pay attention to the preservation of training notices, chat records, the franchisee's signature registration form, sign-in form, training records, training materials sign-in form, on-site training videos, photos, assessment questionnaires or test questions, etc., thus forming a complete chain of evidence. At the same time, attention should be paid to the preservation of archives and "one file per household" as far as possible to facilitate management.
Shanghai Putuo District People's Court (2023) Shanghai 0107 Civil Judgment No. 5175 at the beginning of the Republic of China found that the plaintiff claimed that the defendant Ma had not fully fulfilled his training obligations. The court believes that according to the training photos, training records and assessment results provided by the defendant ma mou, and the fact that the plaintiff has set up shop and operated in a unified business model, it can be concluded that the defendant ma mou has basically fulfilled the corresponding obligations of business guidance and training. In addition, according to the statement provided by the plaintiff, it can also be confirmed that the defendant has provided the plaintiff with 31 person-times of training, according to which it is difficult for the plaintiff's claim to be supported by the court.
Training is a legal obligation of the franchisor, and the franchisor should perform it in a timely and comprehensive manner, otherwise it will have consequences such as the termination of the contract and the liability for breach of contract. At the same time, the franchisor should keep the relevant evidence to effectively prevent the risk of litigation.
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