Newsletter
Amendments to the Fair Trade Commission's Guidelines on the Business Practices of Franchisers
Lee and Li Again Named Elite Firm
Amendments to the Fair Trade Commission's Guidelines on the Business Practices of Franchisers
We wish you a joyful new year!
Lee and Li just once again been named by the Global Competition Review (GCR) as one of the elite firms in Taiwan for outstanding performance in the competition law practice. The full report is published in its special issue (GCR 100). Meanwhile, Who's Who Legal - The International Who’s Who of Competition Lawyers & Economists 2015 adds Mr. James Chen into the list of the world’s leading competition lawyers, alongside Mr. Stephen Wu and Ms. Yvonne Hsieh who had been nominated in previous years as well as this year. Having three lawyers being listed is a well-deserved affirmation of our firm's achievement in the field of antitrust works. The international journal's recognition also affirms Lee and Li's unrivaled capacity for handling competition cases.
By way of update, on December 24, 2014, the Fair Trade Commission ("FTC") amended the Fair Trade Commission's Guidelines on the Business Practices of Franchisers ("Guidelines"). In addition to the rename, the key revisions this time include modifying the timing for information disclosure, adding items subject to disclosure and the manner of such disclosure, and specifying the timing when the franchiser should deliver the contract, etc.
1. Timing for information disclosure. Sometimes, before a final franchise contract is entered into, the franchiser will charge the potential franchisee with a certain fee, and/or execute a draft agreement, memorandum, letter of intent, or any documentation in relation to the franchise relationship with the potential franchisee, requiring that any paid fee will be forfeited or that franchisee should be liable for any loss in case of a final franchise contract not being agreed upon. Such pre-franchise relationship in fact deprives a potential franchisee's freedom to determine whether a franchise relationship is desirable, leaving them no choice but to execute a final franchise contract with the franchiser. Hence, in the amendment this time, the timing for information disclosure is revised to be "within 10 days or within a reasonably determined timeframe before signing the contract or before the existence of pre-franchise relationship."
2. Items subject to disclosure and the disclosure method. In practice, franchisers often attract potential franchisees by financial forecast which is deemed as important information for a potential franchisee to evaluate whether they would like to enter into a franchise relationship. Thus, the information regarding "calculation formula or concrete materials evidencing the operation status of those existing franchisees in case of financial forecast such as estimated revenues /profits being provided" is newly added to the list of items subject to disclosure. By furnishing such information, a franchisee can assess whether the forecast is reasonable or how difficult it will be to achieve the targeted profits. Meanwhile, to embrace the trend of being paperless, the Guidelines stipulate that a franchiser is allowed to provide important information regarding franchise relationship by disc or other forms of electronic media upon the consent of counterparty.
3. Timing for the delivery of the contract. As a franchise contract is the foundation of both parties' rights and obligations, the franchiser should deliver the contract to its franchisee upon the execution. However, in practice, after executing the contract, the franchiser has the need to hold the contract longer for chop affixing or other logistic purpose, which makes the immediate delivery not feasible. Thus, taking into account the actual execution timeline, the Guidelines stipulate that in principle the franchiser should deliver the contract to its franchisee within 30 days of the execution. Nonetheless, in the event that any exceptional circumstance results in the delay of delivery and such delay cannot be attributed to the franchiser, the aforesaid timing requirement is not applicable.
As above amendments will no doubt affect the franchising activities in Taiwan, both franchisers and franchisees are advised to make necessary modification to their practice for legal compliance purpose. If you have any further inquiry, please do not hesitate to contact us.