Franchise Sales Agents in China: Check Their Authority and Promises Before Signing

When considering a Chinese franchise brand, you may be dealing not with head office staff but with an outsourced sales team, a marketing intermediary or a salesperson calling themselves a ‘brand partner’. Any franchise relationship should rest on verifiable authority: permission to introduce an opportunity does not necessarily include permission to set prices, promise refunds or collect payments on behalf of head office. Before signing, establish who you are dealing with, whom they represent and whether their promises bind the brand owner.

1. Distinguish between introducing an opportunity and signing for head office

A franchise salesperson’s authority may be limited to providing promotional materials and arranging site visits, or it may extend to negotiating, signing contracts or collecting payments. These are separate powers. A title such as ‘National Franchise Sales Director’, a photograph taken at head office or a business card bearing the brand’s logo does not, on its own, prove authority to make a particular commitment.

At your first meeting, ask for the full legal name of the business they work for, an explanation of its relationship with the brand owner and verifiable evidence of authorisation. In particular, check:

• Whether the authority was granted by the brand owner that will be party to your franchise agreement;
• Whether the authorised agent is an individual or a franchise sales company, and whether your actual contact is covered by that authorisation;
• Which brand, territory and period the authorisation covers;
• Whether it permits the agent to sign contracts, change fees, promise refunds or collect payments.

If the salesperson says the authorisation is an internal document, ask the brand owner to confirm their authority directly in writing. Use independently obtained contact details to verify this — for example, contact head office through its publicly listed details rather than simply calling another number supplied by the salesperson. A refusal to provide authorisation does not necessarily indicate fraud, but you should not pay until the agent’s authority has been verified.

2. Turn sales promises into contractual obligations for the brand owner

Under the Civil Code of the People’s Republic of China, civil legal acts carried out by an agent in the principal’s name and within the scope of their authority take effect in relation to the principal. The issue is therefore not just what the salesperson said, but whether they had authority to make that commitment on the brand owner’s behalf.

As a general rule, acts performed without authority, beyond the scope of authority or after authority has ended do not bind the principal unless the principal ratifies them. Chinese law also recognises apparent authority: an agent’s act may be effective even without actual authority if the other party had reason to believe that authority existed. However, this depends on the particular facts. You cannot assume that a promise is binding simply because the salesperson regularly meets clients at head office.

The safest approach is to include promises that influence your investment decision in a contract or schedule signed by the brand owner. For example, ‘all opening support is free’ should specify the services included, how often they will be provided, who pays travel and accommodation costs, and delivery dates. ‘Refunds are available in special circumstances’ should define the qualifying circumstances, required supporting documents, refundable amounts and repayment deadline.

Check whether the formal agreement contains wording such as ‘promises made by sales staff do not represent the company’. If the written contract conflicts with what was negotiated, resolve the discrepancy first. Do not rely on assurances that ‘this is just our standard template and will not affect what we deliver’. Promises not confirmed in the contract should not be a basis for payment.

3. Outsourcing franchise sales does not replace statutory disclosure

Commercial franchising in mainland China is specifically governed by the Regulations on the Administration of Commercial Franchising. The Measures for the Administration of Information Disclosure in Commercial Franchising set out further disclosure requirements. The franchisor must provide the prescribed information and a copy of the contract in writing at least 30 days before the franchise agreement is concluded.

A franchise sales company may help pass on documents, but this does not transfer the franchisor’s disclosure responsibility. Sales presentations, short promotional videos and verbal answers cannot replace the written disclosures required by law. Confirm which franchisor is providing the materials, and ask it to respond in writing on important points raised in the agent’s explanations.

The Regulations on the Administration of Commercial Franchising also require franchise agreements to be in writing. Do not mistake a ‘discount confirmation letter’ issued solely by a sales company for a contractual schedule accepted by the brand owner. In particular, check which entity has signed or affixed its company seal, the title of the schedule and its relationship to the main agreement.

If an intermediary says it charges a separate ‘consultancy fee’, ask it to specify the distinct services provided, delivery standards and refund conditions. The brand owner’s franchise fee and the intermediary’s service fee are separate payment arrangements. Do not assume that either party will refund money paid to the other.

4. Complete all authority checks before paying

Make verification part of the signing process rather than a remedy after a dispute arises. Before paying, send the brand owner a concise checklist covering the salesperson’s identity, the concessions they are authorised to confirm, the final contract version, the payment recipient and all additional promises. Ask the brand owner to reply through a verifiable channel and to formally sign any contractual changes.

If the proposed payment recipient is not the franchisor named in the agreement, pause the payment. First obtain clear authorisation for that recipient to collect funds, and confirm whether payment into that account will discharge your payment obligation under the contract and who will issue proof of payment. Do not skip these checks simply because the salesperson says ‘this is how finance requires us to do it’.

If you discover a dispute over authority only after paying, retain original messages, authorisation documents, contracts, payment records and replies from head office. Promptly ask the brand owner to state whether it accepts the acts in question. Do not make further payments based solely on continued assurances from the salesperson. Ratification, apparent authority and responsibility for refunds all depend on the evidence. Seek a lawyer’s assessment where necessary rather than assuming the contract is automatically invalid or that a full refund is guaranteed.

Practical takeaway: verify identity first, check authority next, and then have the brand owner sign off on the promises. A salesperson’s role in securing a deal does not mean they can commit head office to every obligation. Do not factor concessions into your franchise investment decision unless the brand owner has clearly confirmed them.