How Businesses in China Can Set Up Post-Termination De-branding and Handover Procedures Before Franchising

When a shop leaves a franchise network, consumers may have no way of knowing that its authorisation has ended if its sign is still lit and online platforms are still accepting orders. When turning an existing business into a franchise model, the franchisor needs to plan not only how outlets will open, but also how they will remove branding and complete a handover after the contract ends. This helps prevent former outlets from continuing to appear affiliated with the brand and makes clear to franchisees what leaving the network involves.

1. Put de-branding obligations in the contract, rather than issuing instructions at the last minute

China has specific regulations governing commercial franchising. Article 11 of the Regulations on the Administration of Commercial Franchising requires the parties to enter into a written contract, with amendment, rescission and termination of the contract, along with liability for breach, among its principal provisions. The regulations do not set a universal deadline for all outlets to remove branding after termination. Businesses should therefore agree clear deadlines suited to the circumstances of each outlet, rather than presenting an internally set deadline as a statutory requirement.

The contract should distinguish between expiry without renewal, early termination by agreement and termination for breach. For each situation, it should specify when authorisation ends, when the outlet must stop accepting new orders, the deadline for removing physical branding and the date for handover verification and sign-off. If the validity of termination is disputed, the matter should first be addressed through the contractual and legal procedures. Coercive action should not be taken solely on the basis of a staff member's verbal assessment.

The de-branding schedule should also be provided to prospective franchisees in advance, alongside the contract. The Regulations on the Administration of Commercial Franchising require franchisors to provide the prescribed information and the contract text in writing at least 30 days before the contract is signed. The basis for allocating any dismantling, transport and platform administration costs arising on exit should also be explained in advance, rather than imposing additional burdens after signing.

2. Create an inventory of physical and online brand assets

De-branding checks should go beyond the shopfront sign. The franchisor can start by carrying out a mock exit at a company-owned outlet, reviewing every point at which consumers encounter the brand, then turning the findings into a contractual schedule and an operational checklist.

• Physical branding: Shopfront signs, illuminated signs, in-store signage, price boards, staff uniforms, packaging, receipts and branded equipment exteriors.
• Online branding: Listings on food delivery platforms, map listings, social media accounts, booking links, outlet pages in mini-programs and the outlet directory on the franchisor's website.
• Operating materials: Operating manuals, training documents, proof of authorisation, system accounts and other materials intended solely for authorised operations.

For each item, record at least who holds or controls it, how it will be dealt with, the completion deadline and the evidence required. For online accounts in particular, establish who registered them, who has administrator access and what changes the platform permits. Where the franchisor cannot make changes directly, the agreement should require the franchisee to submit applications and cooperate with the platform's review process.

Not everything needs to be destroyed. Ordinary, unbranded equipment owned by the franchisee can remain in use. Branded materials should be assessed separately to determine whether they should be returned, covered, stripped of branding or destroyed. De-branding does not automatically entitle the franchisor to take the franchisee's property. Ownership, authority to dispose of items and responsibility for costs should each be clearly documented.

3. Arrange a phased handover to avoid gaps when branded operations cease

Use a handover checklist to coordinate the legal, operations and IT teams with the franchisee, rather than leaving franchise recruitment staff to chase completion alone. Include columns for the task, responsible person, deadline, verification method and procedure for handling exceptions.

Before authorisation ends, both parties should review outstanding orders, after-sales matters and remaining branded materials, and agree consumer contact channels and which records must be retained. The end of brand authorisation does not extinguish existing responsibilities to consumers, nor should all after-sales work be passed to the franchisor without prior arrangements.

When authorisation ends, new trading activity under the brand should cease as agreed. Ordering, marketing and operational access that is no longer appropriate should be disabled, and outlet directories controlled by the franchisor should be updated at the same time. System access should be handled in stages: ending operational access need not follow the same timetable as retaining necessary access for account reconciliation and after-sales enquiries.

Where a platform's review is still pending, retain acknowledgement of the application and take interim steps, such as stopping new orders and removing brand promotions that the account holder can edit directly. Delays in platform processing do not entitle a franchisee to continue trading as an authorised outlet.

When exporting or handing over records, distinguish between business records, the franchisor's materials and consumers' personal information. A handover must not be treated as permission to copy all customer data without restriction. Any processing must comply with applicable requirements, including the Personal Information Protection Law of the People's Republic of China.

4. Complete the exit with verifiable evidence

Verification should follow the checklist item by item. Removal of physical branding can be checked through site inspections and dated photographs. Evidence of online removal can include screenshots, platform notifications and records of changes to account permissions. Disposal of materials should be supported by an inventory showing quantities and confirmation from both parties.

The final handover document should list completed tasks, outstanding matters, responsible persons and deadlines for completion separately, rather than simply stating that 'there are no outstanding issues between the parties'. If payments or after-sales matters remain unresolved, clarify whether the relevant obligations continue and how they relate to de-branding obligations, so that one does not become a reason to delay the other.

For missed de-branding deadlines, the contract can provide for written notices, a period to remedy the breach and liability for breach. Legal professionals should review these provisions for reasonableness and enforceability. The franchisor should not enter the outlet and remove items on its own initiative, take over private accounts or apply pressure by publicly disclosing personal information.

Practical takeaway: Before offering franchises, run an exercise at one company-owned outlet: 'If authorisation ended today, which signs, accounts and materials would need attention?' Turn the findings into a de-branding checklist, a handover timetable and a verification record, then align each of these with the contractual schedules.