China’s Supreme People’s Court Publishes Seven Illustrative Franchise Cases, Highlighting Integrity and Compliance

According to the People’s Daily article ‘Beware of “Rapid Recruitment” Franchise Scams (Jintai Viewpoint)’, published on 28 September 2026, China’s Supreme People’s Court released seven illustrative commercial franchising cases in August that year. The aim was to use these cases as guidance, encouraging businesses to operate with integrity and in compliance with the law, and supporting the healthy, orderly development of franchising. The release provides judicial information worth noting for those assessing franchise relationships in China.

Illustrative cases highlight integrity and compliance

The central message of the release is to encourage sound business practices through illustrative cases. For franchisors and prospective franchisees, the focus should not simply be on how quickly a contract can be signed or an outlet opened. It should also include how both parties understand and fulfil their agreed obligations.

It is important to distinguish the publication of illustrative cases from the introduction of new legislation. The available reporting extracts do not set out the facts or judicial reasoning in these seven cases. They therefore provide no basis for concluding that a particular fee arrangement or franchise recruitment method has been categorically deemed unlawful. Nor should findings in individual cases be applied indiscriminately to all franchise agreements.

Understand the legal relationship behind a franchise

The report explains that, in legal terms, a franchise chain is a form of commercial franchising: a business that owns resources such as registered trade marks, corporate logos, patents or proprietary know-how contractually licenses other operators to use them. The franchisee operates under a uniform business model and pays fees.

This definition underlines that entering a franchise involves more than buying the right to use a brand name. The business resources, licence to use them, uniform operating model and fee arrangements together provide the basis for understanding the relationship. When assessing an opportunity, rather than relying solely on descriptions of opening an outlet in recruitment materials, prospective franchisees should establish exactly what they will receive, what obligations they will take on and whether these points are recorded in the contract.

Be alert to ‘rapid recruitment’, but do not judge by labels alone

By reporting on ‘rapid recruitment’ franchise scams, People’s Daily has brought the risks associated with recruiting franchisees into public discussion. However, the available information does not identify the specific brands involved, the amounts lost or the issues addressed in each of the seven illustrative cases.

A more prudent approach for those in the franchise sector is to turn risk awareness into documentary checks, rather than judging an opportunity solely by the ‘rapid recruitment’ label. Prospective franchisees should ask the other party to specify the business resources being offered, the scope of the licence and each category of fees, then compare the recruitment materials with the proposed contract. These are due diligence recommendations, not a summary of the legal principles established in the cases.

Base decisions on verifiable information

Franchisors can also use this as an opportunity to review the clarity of their recruitment materials. Do the resources and support promoted to prospective franchisees have corresponding provisions in the contract? Are the requirements for operating under a uniform business model easy for the other party to understand? Clearly explaining the terms of the relationship is more helpful to informed decision-making on both sides than simply emphasising the speed of signing up.

Practical tip: before signing, check four areas: business resources, the scope and terms of the licence, operating requirements and fees. If you intend to rely on these illustrative cases when assessing your own project, first consult the original case texts and seek professional legal advice on the specific contract.