For companies planning franchise recruitment, the first hurdles are the two thresholds established by the Regulation on the Administration of Commercial Franchising (State Council Order No. 485, effective May 1, 2007): the franchisor must be an enterprise, and it must own "operating resources." Many simplify the latter as "must own a registered trademark" — that is not accurate, but practice does rely heavily on trademarks. Below, the rules and the practice are separated clearly.
1. Who Blocks You at Which Stage
- Entity qualification: Article 3 of the Regulation defines commercial franchising as a business activity in which an enterprise (the franchisor) that owns operating resources such as registered trademarks, enterprise marks, patents, and know-how licenses those resources to other operators (franchisees) by contract, the franchisees operate under a unified business model as agreed, and pay franchise fees to the franchisor. The same article provides: units and individuals other than enterprises may not act as franchisors. Individuals cannot run franchise recruitment — this is a hard rule.
- Filing obligation: Article 8 requires the franchisor to file with the commerce authority within 15 days of signing the first franchise contract; for franchising within a province, autonomous region, or municipality, file with the provincial commerce authority; for cross-province franchising, file with the State Council's commerce authority.
- "Two stores, one year": Article 7 requires the franchisor to have at least 2 directly-operated stores that have been operating for more than 1 year; it must also have a mature business model and the capability to continuously provide business guidance, technical support, and business training to franchisees.
2. Is a Registered Trademark Actually a Hard Requirement?
This is the point most often stated wrongly in practice, so the original text matters:
- Article 3 says "owning operating resources such as registered trademarks, enterprise marks, patents, and know-how" — this is an enumerated list in parallel and does not single out "registered trademark" as the only condition;
- But filing review focuses on whether the resource is exclusive and whether protective measures have been established. Per the policy interpretation published by commerce authorities, franchise operating resources refer to resources — including but not limited to registered trademarks and trade names — that can generate revenue for the franchisor, carry exclusive rights, and have protective measures in place, possessing both property and personal attributes;
- The nature of the contract is determined by substance: whether the contract is called a cooperation agreement, a counter-operation agreement, a special distribution agreement, a franchise contract, or a brand exclusive contract, as long as it substantively meets the constitutive elements of Article 3, it is franchising and the filing obligation applies. Evading filing by renaming the contract does not work.
Practical conclusion: the Regulation does not require "must own a registered trademark," but a registered trademark is the most commonly used, most reliable, and most readily accepted operating resource by commerce authorities. Proving exclusivity with an "enterprise mark" or "know-how" usually requires additional evidence, while an approved registered trademark is itself direct proof of an exclusive right with protective measures in place. So the practical approach is to register the trademark first, rather than arguing "whether I can do without a trademark."
One timing caveat: from application to approval a trademark usually takes considerable time; if franchise recruitment starts while the trademark is still "pending," what you hold is an application right, not an exclusive right of registration — claiming to "own a registered trademark" will be deemed untrue and will also fail substantive review.
3. Filing Materials and Procedures
The documents and materials required by Article 8 include:
- A copy of the business license or enterprise registration certificate;
- A sample franchise contract;
- The franchise operations manual;
- A market plan;
- A written commitment and supporting materials showing compliance with Article 7 (i.e., the "two stores, one year" requirement and continuous service capability);
- Other documents and materials prescribed by the commerce authority under the State Council.
Products or services subject to approval before operation also require the relevant approval documents.
Procedures and time limits
- Filing acceptance: the commerce authority shall complete the filing and notify the franchisor within 10 days of receiving the documents and materials compliant with Article 8;
- Supplementation: where the documents and materials are incomplete, the commerce authority may require supplementation within 7 days;
- Publication: the list of filed franchisors is published on government websites and updated promptly;
- Institutional framework: the current regulatory system is commonly summarized as "one regulation, two measures" — the Regulation on the Administration of Commercial Franchising plus the Measures for the Administration of Commercial Franchise Filing and the Measures for the Administration of Commercial Franchise Information Disclosure.
4. Other Mandatory Provisions Easily Overlooked
Filing is only the entry point; contract compliance is the daily risk area:
- Contract contents: Article 11 lists 11 items a franchise contract must contain; missing items may affect the filing and validity;
- Cooling-off period: Article 12 requires agreeing that the franchisee may unilaterally terminate the contract within a certain period after conclusion;
- Minimum term: Article 13 requires the agreed franchise term to be no less than 3 years, unless the franchisee agrees otherwise;
- Continuing obligations: Article 14 requires providing the franchise operations manual and continuously providing business guidance, technical support, and business training;
- Fee disclosure: Article 16 requires that fees collected before signing the contract be explained in writing as to their use and the conditions and method of refund.
5. Common Pitfalls
- Recruiting before having enough directly-operated stores: without 2 directly-operated stores operating for over 1 year, the substantive conditions of Article 7 are not met.
- Claiming "registered trademark" while the application is still pending: false promotion — a contract risk and an advertising compliance risk.
- Trademark in an individual's name while the franchisor is a company: inconsistent ownership requires a transfer or lawful license first.
- License not covering franchise authorization: the trademark license scope does not state whether "sub-licensing and franchise recruitment" is allowed, leaving franchisees' use of the brand without a rights basis.
- Recruiting without filing: filing is a statutory obligation; overdue filing is not only an administrative risk but also counts against you in franchise disputes.
- Renaming the contract to avoid characterization: whatever the name, if it substantively meets the constitutive elements it is franchising.
6. Summary
The Regulation's original words are "owning operating resources such as registered trademarks, enterprise marks, patents, and know-how" — a registered trademark is not the only option; but in filing review and subsequent enforcement it is the most direct proof of exclusivity. The optimal path for franchising is still: register the trademark and put it in the company's name first, then satisfy "two stores, one year," and finally complete the filing within 15 days of the first contract. The rules cited in this guide are current as of 2026; defer to the latest requirements of the commerce authorities.
7. Where to Get It Done
For the specific procedures involved in the above matters, book license filing with MyTMBee, where a registered trademark agent provides end-to-end assistance.