How to Review Franchise Recruitment Advertising and Earnings Claims in China

When expanding an existing business into a franchise network, franchisors often start by preparing recruitment pages, short videos and presentation materials. Yet even genuine data from company-owned stores may not be suitable for franchise recruitment advertising. A pre-publication review process can reduce misleading claims and help prospective franchisees make decisions based on operating conditions rather than promises of earnings.

1. Distinguish advertising from pre-contract disclosure

China has specific regulations governing commercial franchising. Article 17 of the Regulations on the Administration of Commercial Franchising prohibits franchisors from engaging in deceptive or misleading promotional activities. It also prohibits their advertisements from containing claims about the earnings franchisees may derive from franchised operations.

A review must therefore ask not only “Are these figures accurate?” but also “Does this promote franchise earnings?” Statements such as “recoup your investment quickly” or “earn a steady net profit every month” should not appear in franchise recruitment advertising. Adding “for reference only” or “actual earnings vary” does not remove this specific restriction. The Advertising Law of the People’s Republic of China also applies, requiring advertisements to be truthful and free from false or misleading content.

Separately, the Regulations on the Administration of Commercial Franchising and the Measures for the Administration of Information Disclosure in Commercial Franchising require franchisors to make written disclosures before a contract is signed. These include relevant investment budgets and information on franchise operations. Providing legally required information to a prospective contracting party is not the same as publicly promoting franchise earnings. Advertising restrictions must not be used as a reason to omit mandatory disclosures, nor should disclosure documents simply be repurposed as public recruitment posters.

2. Review the message, not just sensitive words

Start by listing every franchise recruitment touchpoint: websites, social media accounts, live streams, exhibition materials, recruitment agents’ pages and introductory documents regularly sent by sales staff. Do not assume that material falls outside the rules simply because it is sent from a personal account or labelled an “internal discussion”. Assess its content, audience and method of distribution together.

Use three categories when reviewing materials:

• Earnings-related content: Franchise outlet profits, investment payback periods, rates of return and franchisee interviews suggesting “guaranteed profits” should not be used in recruitment advertising.
• Potentially misleading content: Claims such as “zero risk”, “no management needed” or “head office guarantees customers” should be removed or replaced with factual descriptions of services and clear limits on what is provided.
• Verifiable operational information: Product categories, training arrangements, site-selection support processes and equipment requirements can be central to the presentation, but must reflect actual capabilities and contractual commitments.

Case studies of company-owned stores also need scrutiny. Even where the figures are accurate, accompanying statements such as “you can replicate this” or “the next successful outlet could be yours” may still imply franchise earnings. A safer approach is to show operating processes and the work actually required, rather than using screenshots of income to attract enquiries.

3. Create a traceable publication approval record

Franchisors do not need to buy a complex system at the outset, but each recruitment asset should have a clearly designated owner. A useful workflow is “submission by the business team, verification by operations, compliance review, authorised publication”. This helps prevent recruitment staff from changing figures or expanding service promises on their own.

The approval record should cover at least:

• Promotional claims: What message is being conveyed, and whether it involves earnings or guarantees.
• Supporting evidence: Training plans, service records, outlet lists and other evidence, with the scope of any data and its cut-off date.
• Limits of service delivery: Who provides the service, which regions it covers and whether conditions apply.
• Published version: Final copy, images, video subtitles, distribution channels and approvers.
• Review triggers: Which content must be updated when service packages, outlet status or business relationships change.

For example, a single telephone consultation cannot substantiate “end-to-end site-selection support”. Instead, describe accurately the catchment-area information reviews, on-site assessments or written feedback that head office actually provides, and state any applicable conditions. Materials featuring trade marks, partner organisations or outlet photographs should also be checked for permission to use them. An ordinary commercial relationship must not be presented as official endorsement.

Agreements with franchise recruitment agents should specify how materials may be used, how amendments are approved and what cooperation is required when content must be taken down. Franchisors should still carry out regular spot checks rather than simply handing compliance responsibility to an external team.

4. Keep enquiry scripts consistent with public materials

Removing earnings promises from posters while allowing sales staff to promise callers that they will “definitely recoup their investment” does not meaningfully reduce risk. Franchisors should prepare consistent answers to common questions and train staff to distinguish factual information, modelling assumptions and business outcomes that cannot be guaranteed.

When asked “How long will it take to recoup my investment?”, staff can first explain that the franchisor does not guarantee a payback period, then help the applicant understand variables such as rent, staffing costs, wastage and the operator’s own input. Business information that must legally be disclosed should be provided accurately under the disclosure rules, with its basis explained. Saying “we do not guarantee earnings” is not a substitute for meeting those obligations. Investment projections must not become a disguised way of promoting earnings either.

If non-compliant material is found, suspend its distribution, notify the relevant channels to remove it, preserve the original version and record the corrective action taken. If inaccurate information has already influenced a particular applicant’s judgement, provide a clear correction to that person rather than quietly replacing the page. Where a dispute or a significant commitment is involved, seek advice on how to proceed from a lawyer familiar with China’s franchising rules.

Practical takeaway: Before formally launching franchise recruitment, review one complete recruitment page, one live-stream script and a full set of enquiry scripts. Shift from “attracting franchisees with earnings claims” to “helping them assess the opportunity through verifiable operating requirements and support”. This gives the franchise network clear, credible expectations from the very first contact.