Point of View...............................................................................................

Published:

2021-12-05

Foreword At present, most of the cases of franchise contract disputes contacted by judicial practice are caused by dishonest franchise enterprises. In the agency activities, the author participated in several cases of franchise contract disputes, for franchising and franchise contract disputes, the author based on practical experience and reading related articles and books, organized as follows, with a view to enlightening readers. Text The Historical Development of 1. Franchising 1. On November 14, 1997, the former Ministry of Domestic Trade of China issued the Measures for the Administration of Commercial Franchising (for Trial Implementation), which stipulates that franchising refers to the franchisee's granting of his own trademarks (including service trademarks), trade names, products, patents, proprietary technologies and business models to the franchisee in the form of contracts, and the franchisee engages in business activities under the unified business model of the franchisor in accordance with the provisions of the contract, and pay the corresponding fees to the franchisor. 2. On December 31, 2004, the Ministry of Commerce issued the Measures for the Administration of Commercial Franchising, which was formally implemented on February 1, 2005. The Measures stipulate that commercial franchising means that through signing a contract, the franchisor will have the right to grant trademarks, trade names, business models and other business resources to others for use by the franchisee. The franchisee shall engage in business activities under a unified business system in accordance with the contract and pay franchise fees to the franchisee. 3. On January 31, 2007, the 167th executive meeting of the State Council passed the Regulations on the Administration of Commercial Franchising. Franchising refers to enterprises (hereinafter referred to as franchisees) that have registered trademarks, enterprise logos, patents, patents and other operating resources. The franchisees license their operating resources to other operators (hereinafter referred to as franchisees) in the form of contracts, and the franchisees operate under a unified operating model in accordance with the contract, and to the franchisor to pay franchise fees for business activities. In the same year, the Ministry of Commerce promulgated the Measures for the Administration of Information Disclosure of Commercial Franchises and the Measures for the Administration of the Filing of Commercial Franchises. 4. On November 7, 2011, the Ministry of Commerce revised the Administrative Measures for the Filing of Commercial Franchises. On January 18, 2012, the Ministry of Commerce revised the Measures for the Administration of Information Disclosure of Commercial Franchises. Characteristics of 2. franchising The basic characteristics of franchising are: (1) the franchisor owns the business resources such as registered trademarks, enterprise logos and patents; (II) the franchisee to use the franchisor's business resources under a specific business model according to the authorization of the franchisor; (III) the franchisee to pay the franchisor's franchise fees in accordance with the agreement. (I) academic perspective It is generally believed that franchising has five essential characteristics: (1) Franchising is a business model that uses one's own know-how to combine with the capital of others to expand the scale of operations. Thus, franchising is an expansion of technology and brand value, not capital. (2) Franchising is an organization in which the right of management controls ownership, in which the franchisee invests in the franchise and has the right to own and manage the store, but does not have the right to make management decisions. (3) Franchising is a win-win business model. The franchise relationship can only be effectively maintained if the franchisor is allowed to develop more efficiently than the direct business, and if the franchisee is allowed to gain more benefits than the business alone. (4) Franchising is a special kind of transaction. A special commodity is traded in a franchise, which includes a series of tangible or intangible commodities such as products, patents, business models, etc. Unlike a general transaction, the franchisor and the franchisee sign a franchise contract, which means the beginning of a longer-term transaction between the two parties. During the term of the contract, the franchisor and the franchisee shall maintain close and continuous mutual support and cooperation. (5) Franchising is an intelligent form of business organization. Franchising enables the franchisee to make the most of the combination, the use of their own advantages, and maximize the absorption of a wide range of social resources, the franchisee to reduce the risk of entrepreneurship and time, capital and other entrepreneurial costs. (Cite: See Hu Xiaosong, ed., Introduction to Franchising, Renmin University of China Press, 2011, p. 17. Chen Axing, Wu Yunliang, ed., Franchising, China Business Press, 2006, p. 6.) Views of (II) practitioners In practice, it has been argued that, starting from the definition of the Regulations, franchising consists of three basic elements: One is a resource, that is, the franchisor must have a registered trademark, corporate logo, patents, know-how and other operating resources; The second is a way, that is, a contractual relationship between the franchisor and the franchisee; the third is a model in which the franchisee operates under a unified business model. This unified model is reflected in all aspects, ranging from management, promotion, quality control, etc. to the decoration design of the store and even the setting of signs. In general, this model has the characteristics of unification, standardization and standardization. The core of franchising is the paid output of intangible assets. (Cited: Tu Zhi, Editor-in-Chief, Li Guangxing, and Yang Fan, Deputy Editor-in-Chief: "Application of Commercial Franchising Law", Kyushu Publishing House, 2010, p. 2.) The difference between (III) franchise and other business models. 1, the difference between franchising and chain management. Compared with franchising, chain management is a superior concept. The scope of chain management is far greater than franchising. The definition of chain operation by China Chain Management Association [35] is: "generally refers to a number of stores operating similar goods or services, combined into a consortium in a certain form, specialized division of labor under the overall planning, and centralized management is implemented on the basis of division of labor to simplify complex business activities in order to obtain economies of scale". According to the Opinions on the Operation and Management of Chain Stores issued by the former Ministry of Internal Trade on March 27, 1997, chain stores refer to a number of stores that operate similar commodities and use a unified trade name, and under the management of the same headquarters, adopt unified procurement or grant concessions, etc., to achieve economies of scale. Article 4 of the opinion stipulates that chain stores include the following three forms:(1) direct chain stores. The stores of the chain are all wholly owned or controlled by the headquarters and are operated under the direct leadership of the headquarters;(2) voluntary chain. The stores of the chain store are all independent legal persons, the ownership relationship of their respective assets remains unchanged, and they are jointly operated under the guidance of the headquarters;(3) franchise chain (or franchise chain). The stores of the chain store sign a contract with the headquarters to obtain the right to use the trademark, trade name, business technology and sales headquarters to develop goods, and the right to operate is concentrated in the headquarters. 2, the difference between franchising and direct sales. (IV) the "Regulations on the Administration of Direct Selling" promulgated by the State Council in 2005 stipulates: "The direct selling referred to in these regulations refers to the distribution method in which direct selling companies recruit direct sellers, and the direct sellers directly sell products to end consumers outside the fixed business premises". First, the legal relationship is different. Second, direct selling companies are different from franchisors. Third, direct sellers and franchisees are different. Fourth, the purpose of legislation is different. Fifth, the field of application is different. Direct selling is mainly applicable to the retail sector. Sixth, responsibility is different. (Source: Beijing Higher People's Court, Intellectual Property Division, "Interpretation of the Principles of Commercial Franchise Contracts and Trial Practice" Section 1) 3. franchise contract dispute A franchise contract is a continuous contract, and if the cooperation between the franchisor and the franchisee can develop smoothly as expected at the time of the original contract, then each franchise will become a successful franchise system. However, in reality, there are often dishonest franchisors and franchisees, and it is inevitable that the market will change and deviate from the original franchise forecast, and there will be matters that were not expected at the time of the establishment of cooperation and no agreement can be reached. Therefore, the root cause of franchise disputes is that the franchisor and the franchisee are different subjects of interest, and franchise contract disputes will inevitably occur based on conflicts of interest. Lawyer Case: The author helped the above-mentioned licensees to recover the franchise fee and interest in the franchise contract dispute case between Wang Moumou, Liu Moumou, Li Moumou, Lu Moumou and other 6 people and Bright Eyes Biological Company. The six parties signed the "Joining Agency Agreement (Prefecture-level Agency)" with Mingmou Company at different times. The contract respectively stipulated the joining method, expenses, agency period, rights and obligations, etc. The attached table after the contract was the "Equipment Configuration List of Mingmou Lifetime Vision Rehabilitation Project". Several parties remitted money to the franchisor company and its legal person respectively. The latter parties want to terminate the contract with Bright Eye and demand a refund of the franchise fee. The lawyer carefully consulted the "franchise agency agreement" and found the relevant industry norms and effectiveness. Finally, according to the documents issued by the general office of the National Health Commission and other six departments, it was determined that the franchisor's franchise behavior was an act of deceiving consumers and seeking illegitimate interests. It used the "health care cream" without quality inspection to carry out vision rehabilitation physiotherapy, and exaggerated and fabricated the treatment effect, it has disrupted the regulatory order of the myopia treatment and health care products market. After the court heard the judgment, it was found that the franchise agreement violated the public order and good customs of the society and harmed the public interest of the society. The franchise agency agreement was found to be invalid, and the franchise fees of several parties were returned, which achieved good results. Common Types of 4. Franchise Contract Disputes and the Concept of Court Judgment Common Types of (I) Franchise Contract Disputes 1, confirm the franchise contract invalid dispute. 2, the cancellation of the franchise contract dispute. 3, the franchise contract to terminate the dispute. 4, due to the performance of the franchise contract in breach of contract, the request to terminate the contract or bear the liability for breach of contract. The Judgment Idea of (II) Franchise Contract Disputes First, respect for contractual autonomy and appropriate protection of relatively vulnerable franchisees. Second, the reasonable allocation of the burden of proof, reasonable interpretation. When the franchisee proves that the franchisor constitutes fraud, false propaganda and fails to fulfill the obligation of information disclosure, taking into account the actual ability of the franchisee to prove, the burden of proof is reasonably allocated, and the litigation relationship between the two parties is balanced by the transfer of the burden of proof. Many franchisees sue is not clear whether the contract is invalid or cancel the contract or terminate the contract, at this time the judge needs to exercise the right of interpretation in a timely manner, according to the basic case to guide the parties to adjust the claim. For the legal consequences of the contract being confirmed invalid, revoked or terminated, the judge should also explain in time that, with the consent of the parties, it can be dealt with together in one case to reduce the burden of the parties. Third, deal with related cases, and strive to achieve the unity of legal and social effects. (Cited: Beijing Higher People's Court, Intellectual Property Division, "Interpretation of the Principles of Commercial Franchise Contracts and Trial Practice") Relevant laws and regulations 1. Regulations on the Administration of Commercial Franchising, issued by the State Council, 2007 "Competing laws and regulations: Trademark Law of the People's Republic of China (2019 Revision) the People's Republic of China Copyright Law Anti-Unfair Competition Law of the People's Republic of China (2019 Revision) 」 2. Measures for the Administration of Information Disclosure of Commercial Franchises, Ministry of Commerce, 2012 3. Guiding Opinions of Beijing Higher People's Court on Several Issues Concerning the Application of Laws in Hearing Disputes over Commercial Franchise Contracts, issued by: Beijing Higher People's Court, 2011; "The original guiding opinions and management regulations have not been revised, and will still refer to the provisions of the original the People's Republic of China Contract Law, the General Principles of the People's Republic of China Civil Law and other laws and regulations. For example, Article 13," If a party to a franchise contract fails to perform the contract as agreed, making it difficult to achieve the fundamental purpose of the contract, the other party may terminate the contract in accordance with Articles 94 and 96 of the the People's Republic of China Contract Law 」

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