Franchise Risk Legal Analysis

Franchising has been prevailed over the world upon its win-win mode after twentycentury. After the entry of WTO, Over-sea franchising brands began to launch onChinese Market and domestic enterprise also try to develop through franchising.However, there are also many risks: Many unlawful franchisors try to make a profitthrough false pretense under the name of franchising, or investor steals or disclosesknow-how from franchisor. With the purpose of risk control and give benefit toChinese legislation system of franchising, the writer analysis possible risks andcorrespondence laws and regulations on the basis of international legislation.This paper consists of preface, three parts in text and conclusion.The preface points out the leitmotiv of this text. In preface, the writer describes thedevelopment and legislation of franchising in both china and other country, andanalyses the necessity of analyzing risk from the perspective of law.The text will be divided into three parts. These three parts will discuss franchisingrisks through general definition, possible risks the franchisee may bear andcorresponding legal analysis, possible risks the franchisor may bear andcorresponding legal analysis.The first part: general introduction of franchising risks.This part will focus on general definitions, types and basic forms of franchising,analyze the characteristics and causes of the risks in franchising.The second part: risks of franchisee and its legal analysis.As one of the most important portion, this part will analyze possible risks franchiseemay bear, including the risk of joining in franchising arising from dissymmetryinformation, operation and default risks, exits and transfer risks. The writer comparesoverseas legislation system concerning protection of franchisee and proposal threemagic weapon: regulate franchisor's qualification by law, perfect informationdisclosure system and standardize franchising contract. Finally, the writer will pointout the necessity of franchisee system and the insufficiency in Chinese legislation.The third part: risks of franchisor and its legal analysis.Franchisor always confronts with three difficulties: how to maintain its intellectualproperty, the possible antimonopoly investigation and risks of vicarious liability.Therefore, the writer will analyze franchisor's risks in terms of foregoing difficultiesand analyze how to control risks by current laws and regulations and point outinsufficiency in Chinese legislation. The conclusion will summarize the whole text and describe practical and long-terminfluence of franchising.