Franchising an Existing Business in Japan: Licence Checks and Opening Approval

When turning an existing business into a franchise, the track record of company-owned outlets alone cannot establish whether another operator can legally open at a different location. The franchisor and franchisee are independent businesses: the franchisor’s licences and the founder’s qualifications cannot simply be shared. To build a healthy franchise network, decide who will check what, and which conditions must be met before an outlet can open, before you begin recruiting franchisees.

1. Break down existing licences into operating requirements

Start by listing the products and services offered at company-owned outlets, along with the licences, notifications, qualifications and facilities required to provide them. Collecting copies of licences is not enough. Distinguish between requirements that attach to the business operator, the premises and the qualifications of individual staff members.

For example, a food-service business should check requirements such as an operating licence under Japan’s Food Sanitation Act and the appointment of a food sanitation supervisor. The procedures required may vary depending on the food handled and the preparation or manufacturing involved. Do not assume that a restaurant licence allows an outlet to sell every product.

Your checklist should include, at a minimum:

• The business activities covered, the relevant legislation and local authority standards
• The names of the required licences, notifications and qualifications, and the authorities to consult
• The business responsible for applying or submitting notifications
• Requirements relating to premises and equipment
• Requirements for appointing qualified staff, and arrangements for their absence
• Any procedures required for renewal, changes or closure

Even practices followed at company-owned outlets simply because “we have always done it this way” should be reviewed before being transferred to franchisees. New openings and existing premises may be subject to different checks. Experience at company-owned outlets alone is not enough to guarantee that an application will be approved.

Take particular care where the founder also serves as the business’s required qualified professional. Identifying whom the franchisee can appoint, and whether trading can continue if that person leaves, helps establish whether the business model can be replicated legally.

2. Check local and premises requirements before signing a lease

Leaving regulatory checks until the fit-out is complete can mean redoing work or delaying the opening. Even if the franchisor supplies standard plans, they may not be suitable for every property. Checks must take account of local ordinances, the permitted use of the premises and the condition of the building.

In practice, establish a process for compiling the proposed business activities, menu or services, floor plans and equipment plans as soon as a potential property is identified. Use these to consult the relevant authority, such as the local public health centre. Matters relating to Japan’s Fire Service Act or Building Standards Act should also be checked with the appropriate authorities or specialists.

Including the following checkpoints in your project tracker can help keep decisions consistent:

1. Before applying for premises: Check whether the proposed business can operate there and whether there are any major constraints.
2. Before signing the lease: Identify the work required, any landlord consent needed and potential application issues.
3. Before starting work: Complete the necessary preliminary consultations on the plans and equipment specifications.
4. Before opening: Confirm that the required licences have been obtained, notifications submitted and qualified staff appointed.

These are examples of management procedures a franchisor might adopt, not statutory steps that apply uniformly throughout Japan. Consultation and assessment times also vary, so allow a contingency when working backwards from the planned opening date.

Remember that preliminary consultation with an authority is not itself a licence. Record the consultation date, department, documents submitted, advice received and unresolved issues. Track “consultation completed” separately from “licence obtained”.

3. Align responsibilities in the contract and support procedures

Helping a franchisee prepare application documents does not automatically make the franchisor legally responsible for the franchisee’s operations. Equally, the franchisor should not simply state in the contract that “licensing is the franchisee’s responsibility” while withholding information about the equipment or operating methods it requires.

The franchise agreement should clearly identify who applies, who pays, the scope of the franchisor’s support, the obligation to submit supporting documents and the conditions for opening. If an external professional is engaged to handle administrative procedures, check that they hold the qualifications and authority appropriate to the work involved.

Responsibilities can be made explicit as follows:

Check	Franchisor’s role	Franchisee’s role
Defining business activities	Provide standard service descriptions and equipment specifications	Declare any additional local services
Consulting the authorities	Supply standard plans and explanatory materials	Consult the authority for the outlet’s location and share the outcome
Applications and notifications	Monitor progress and identify missing documents	Complete the necessary procedures
Pre-opening checks	Assess whether contractual opening conditions have been met	Submit licences and other supporting evidence

Plan for rejected applications and construction delays as well. Consider in advance how changes to the plan, revised schedules, additional costs and situations in which the contract cannot continue will be handled. Avoid arrangements that make franchisees bear every cost regardless of its cause, including problems with franchisor-specified designs or equipment. Work with a lawyer to clarify how responsibility should be allocated.

4. Distinguish franchise regulation from operating licences

Japan has no single law comprehensively governing franchising. Nevertheless, the rules applicable to franchise agreements and the licensing requirements for individual business activities must each be satisfied.

Article 11 of the Small and Medium-sized Retail Business Promotion Act requires franchisors falling within its definition of a “specified chain business” to provide written information and explanations to prospective franchisees before a contract is signed. Applicability is not determined automatically by describing a business as retail or food service. It must be assessed against statutory criteria, including those relating to the supply of goods.

The Japan Fair Trade Commission’s guidelines on franchise systems under the Antimonopoly Act also identify conduct in franchise recruitment and dealings between franchisors and franchisees that may raise competition-law concerns. Unsupported claims such as “you can trade under the franchisor’s licence” or “this equipment guarantees approval” may be problematic if they misleadingly present the opportunity as substantially more favourable than it really is.

Contractual responsibilities are also governed by legislation such as the Civil Code. A franchisor’s approval to open does not replace an operating licence issued by the authorities. Conversely, obtaining that licence does not mean that every opening condition in the franchise agreement has been met. Keep these two decisions distinct in both the contract and staff procedures.

5. Link opening approval with ongoing change management

Final pre-opening checks should rely on documentary evidence, not just verbal reports from the person responsible. For licences and similar documents, check the operator’s name, premises address, authorised activities, validity period and any attached conditions against the actual outlet plan. For notifications, retain evidence showing that the required procedures have been completed.

The franchisor’s assessment form should distinguish between “verified”, “not yet verified” and “action required”. Assign an owner and a deadline to each unresolved issue. Where the licences or other requirements necessary to begin trading are not in place, do not allow the outlet to open merely because promotional activity is scheduled or rent is already being paid.

Checks do not end when the outlet opens. Menu additions, equipment changes, relocation, a change of operator or the departure of qualified staff may trigger the need to consider additional licences, change notifications or other procedures. Require franchisees to notify the franchisor before making changes. When the franchisor revises the standard menu, include a check on whether individual outlets need to complete any regulatory procedures.

Practical takeaway: Choose one company-owned outlet and summarise its licensing, qualification and equipment requirements on a single checklist. Then add the applicant responsible at franchisee level, the checks needed before signing a lease and the documentary evidence required to approve opening. This is the first step towards a framework for safe expansion.