Franchise IT systems in China: agree software fees, fault response and data exports before signing

When joining a franchise network, entrepreneurs often focus on the brand and premises, overlooking the ordering, stock, membership and staff scheduling systems they will use every day. If an account is suddenly disabled or a system fault goes unresolved, a shop may be unable to trade normally even with stock and staff available. Before signing, break down the promise that “head office provides the system” into clear arrangements for licensing, fees, services and data.

1. Establish who supplies the system and who is responsible for support

Mainland China has specific regulations governing commercial franchising. Article 11 of the Regulations on the Administration of Commercial Franchises requires contracts to specify the content and delivery of services such as business guidance and technical support. Article 14 requires franchisors to continue providing the relevant services as agreed. These provisions give franchisees a basis for seeking clear commitments on system support, but they do not mean that all software must be free or that head office must guarantee fault-free operation.

Ask the franchisor to list every system your outlet must use, identifying the software operator, contracting party, party charging the fees and customer support channels for each. In particular, distinguish between systems supplied by head office and services that franchisees must buy separately from a software company.

If the contract merely says “contact the third party about system issues”, ask further questions. Is head office responsible for activating accounts, configuring product information and co-ordinating repairs? If the third party stops providing its service, who will arrange an alternative? Do not assume that a promise made by the software company is an obligation head office has accepted.

Ideally, draw up a service schedule agreed by both parties, setting out the responsibilities of head office and third-party providers side by side. This can help prevent each from passing responsibility to the other when a fault occurs.

2. Put mandatory charges and acceptance checks in a contract schedule

Do not assess a system quotation solely on its first-year subscription fee. Ask the franchisor whether account set-up, installation, integrations, training, maintenance, upgrades and additional terminals attract separate charges. Distinguish between requirements for opening the outlet and optional features. In particular, check whether you must use specified equipment, whether charges are calculated per outlet, per account or by usage, and whether prices can be increased unilaterally during the contract term.

The Regulations on the Administration of Commercial Franchises require relevant information to be disclosed in writing, and a copy of the contract to be supplied, at least 30 days before signing. Verify mandatory system charges and technical support arrangements before signing, rather than waiting until opening time to accept a pop-up fee agreement.

Acceptance criteria should also be specific. For example, you could require the following tests to be completed on the equipment your outlet will actually use:

• Whether products, prices and stock levels synchronise correctly;
• Whether staff in different roles can operate the system with the appropriate permissions;
• Whether a workable alternative procedure is available if the internet connection fails;
• Whether the reports your outlet needs can be viewed and exported.

Payment milestones can be linked to account activation, completion of testing and correction of faults. These are contractual arrangements to negotiate, not standard acceptance conditions prescribed by the regulations. Do not treat “account details issued” as confirmation that the system is ready for normal use.

3. Agree fault severity levels, not just “prompt action”

A promise to “provide technical support” does not adequately explain what will happen if your outlet cannot operate. Distinguish major faults, such as being unable to log in or place orders, or serious stock discrepancies, from routine issues such as report display errors. For each category, agree support hours, initial response times, temporary workarounds and updates on progress towards a fix.

Be clear about the difference between “response” and “restoration”: an acknowledgement from customer support does not mean the problem has been resolved. Ask for an escalation contact for major faults and establish whether support is staffed at night, at weekends and on public holidays. Negotiate realistic timescales that reflect your outlet’s trading hours rather than copying an impractical template.

Also specify how planned maintenance will be notified and how responsibility will be determined when faults arise from the outlet’s internet connection, equipment or head office systems. If a dispute occurs, retain screenshots, support ticket numbers, the timing and duration of the fault, and details of its impact. A drop in turnover alone does not establish that head office is responsible for all losses.

For persistent or recurring faults, you can negotiate fee reductions or waivers, alternative services and termination rights once agreed conditions are met. Compensation for losses will still depend on the contract, the breach, causation and supporting evidence. Avoid accepting a blanket statement that “no liability is accepted for any system faults”.

4. Secure data access and migration options in advance

A working system does not necessarily mean your outlet can retrieve its business records whenever it needs them. Before signing, test report exports and agree which data can be exported, in what format, for which historical periods and within what processing times. Screenshots or files that cannot be filtered or lack key fields may be insufficient for stocktaking and account reconciliation.

Avoid simply stating that “all data belongs to the franchisee”. Orders, stock records and members’ personal information involve different rights and interests. Even if your outlet collected members’ details, that does not mean you may copy or transfer them without restriction. The Personal Information Protection Law of the People’s Republic of China applies to the processing of personal information. Contractual export arrangements cannot replace the necessary lawful basis for processing or security measures.

Agree in advance what happens when the contract expires, a fee dispute arises or you change systems. Specify the procedures for restricting accounts, notice requirements and periods for remedying issues. Where lawful, preserve necessary read-only access and a window for exporting data. Also clarify who is responsible for backups, how long they are retained and whether they can be restored. Do not equate “stored in the cloud” with permanent access.

Practical takeaway: Before paying, obtain a system fee table and a schedule of service responsibilities, and personally run through a fault-reporting demonstration and a data export. Recording the key functions confirmed during these demonstrations in a contract schedule offers more protection than a general promise of “full support from head office”.