NEW RULES ON FRANCHISING

01/01/1999

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Since no laws and regulations currently govern the activities of franchise businesses, the Fair Trade Commission is drafting the Franchise Owner Information Disclosure Regulations. The regulations lay out the respective rights and responsibilities of the franchiser and the franchisee so as to help franchisees select an appropriate franchise system and evaluate business risk prior to joining.

Among others, the regulations requires in ten days prior to entering into a franchise contract the franchisor to provide the following information to the franchisee:

The franchisor's company name, total capital, registration and line of business, and the date on which franchising began;

The names and backgrounds of the responsible person for the franchisor and its main sales manager;

The collection of the franchise fee, the items to be collected, their nature, their amounts, and conditions of their collection and refund;

Related fees collected under the franchise contract;

Trademarks and service marks used by the authorized franchisee, and related limitations;

Limits on the franchisor's management rights over franchisees;

Operating regions and regional separation policies of the franchisor toward multiple franchises or non-franchise outlets;

Main points and methods of contract renewal and termination.