The Chinese Ministry of Commerce announced this week that it will be lifting the market access and national treatment barriers imposed on foreign franchisers in China. A new franchise management regulation has been drafted, and will come into effect in February 2005. The revised directive will be applicable to all enterprises franchising in China.

Foreign franchisees will differ from local businesses only in certain procedures, while all enterprises operating in China will be under equal establishment conditions, rights, obligations, as well as rules concerning information revelation and promotional activities. Detailed stipulations are also included in the amendment, pertaining to franchisers/franchisees, franchising contracts, information revelation, promotional activities, supervising, franchising of foreign invested enterprises, and legal obligations.

China is withdrawing these limitations in compliance with its agreement on entering the WTO (World Trade Organization), to permit franchising without restrictions within three years upon accession. The predecessor to this new management rule was issued in 1997, yet was more principle-based and without legal effects.

Franchising was introduced into China in the late 1980's. Around 1,900 franchise systems now operate throughout the country in approximately 60 different business types and industries.