Approval and Recordal Requirements for Franchising

The following approval and recordal requirements need to be obtained in respect of establishing a franchise operation in the PRC.

1. The approval for registration of the marks for the relevant goods and services with the PRC Trade Mark Office. This generally takes between eighteen months to two years. Registration of marks in the PRC is particularly recommended and at the earliest possible stage, since the PRC operates a first to file system. Note that currently in the PRC, it is not possible to register a service mark for the specific category of retail services (unlike in Hong Kong, where this is possible), and it may be necessary to register the service mark against a closely related category, for instance, "business administration" and "cost analysis" services, although it is uncertain whether this will work to protect against use of the mark in retail services.

2. The approval for registration of the relevant trading names as enterprise names at the national and local level with the State Administration of Industry and Commerce or its local Bureau under the Enterprise Names Registration Regulations. This is additional protection which prevents other enterprises in the PRC from registering their businesses using the names which the franchisor wishes to protect. Note however that currently the enterprise name registration system has been suspended at the national level and is undergoing review (due to an apparent conflict of this system with the 1994 Companies Law) and while it is still possible to register a name of the local level, it is possible to do so only with a name in the Chinese language.

3. The registration of the trade mark licence with the PRC Trade Mark Office and the local Bureau of Administration of Industry and Commerce within three months of the date of the licence.

4. The approval by and filing of the technology and intellectual property import agreement and, if relevant, the joint venture contract with the Ministry of Foreign Trade and Economic Cooperation.

This article is intended to provide a general guide to the subject matter. Specific advice should be sought about individual circumstances. Further information or advice may be obtained from Linklaters & Paines, Hong Kong office, 14th Floor, Alexandra House, Chater Road, Hong Kong; telephone: (852) 2842 4888; fax: (852) 2810 8133; contact David Mullarkey or Jeremy Parr.