Different Terms Within the Same Franchise in Taiwan: Comparing Fees and Support Before You Sign

Before joining a franchise network in Taiwan, you may discover that the same brand offers different terms to different franchisees: some receive fee reductions or waivers, while others get extra help with opening their outlets. These differences are not necessarily unlawful, nor do they necessarily mean your offer is unreasonable. Before committing, the key is to check whether you are comparing similar arrangements, how the franchisor explains any differences, and whether clear criteria allow you to qualify for equivalent treatment.

1. Distinguish commercial differences from unlawful differential treatment

Taiwan has no single, dedicated franchise law governing franchise relationships, but that does not mean the sector is unregulated. Franchise transactions are subject to general legislation, including the Fair Trade Act and the Civil Code. The Fair Trade Commission also has Principles for Handling Cases Concerning Franchisors’ Business Practices, which address matters such as franchise disclosure and the contracting process.

Article 20, subparagraph 2 of the Fair Trade Act addresses differential treatment of another business without justification, but it also requires a risk of restricting competition. Finding that another outlet pays less does not, by itself, establish that the franchisor has broken the law. Whether there is a legitimate justification, whether the trading conditions are comparable, and how the differences affect competition all require a case-specific assessment.

For example, differences in purchasing volumes, delivery costs, outlet formats or the length of the business relationship may explain some variation in treatment. However, the franchisor simply saying that terms were ‘individually negotiated’ is not enough to settle the assessment. Equally, franchisees do not automatically gain a right to the lowest fees charged anywhere in the network.

Your aim should be to understand the rules and risks, rather than to insist that every outlet operates on identical terms.

2. Build a like-for-like comparison, rather than focusing only on incentives

When comparing offers, first check that the other outlet is also franchised. Company-owned outlets are operated directly by the franchisor and have different cost and responsibility structures from independently owned franchises. Their internal resource allocations are therefore not a suitable direct benchmark for franchise incentives.

When asking the franchisor to explain an offer, organise your comparison under the following headings:

• Outlet format and scale: Are the floor area, product range, equipment and scope of services similar?
• Contract timing: Were the offers part of recruitment campaigns run at different times? When did each incentive begin and end?
• Commitments and obligations: Do lower fees come in exchange for a longer contract, higher purchasing volumes or other obligations?
• Support provided: Is extra support limited by frequency, duration, location or eligibility criteria?
• Actual net cost: Does a discount require upfront payment, a claim after targets have been met, or repayment in certain circumstances?

For example, if another franchisee receives an opening subsidy but also commits to operating on a different scale, comparing the subsidy amounts alone will be misleading. Put the commitments required to obtain the incentive, the consequences of missing targets and the payment timetable in the same comparison table.

When seeking information from other franchisees, obtain their consent and do not ask them to hand over documents covered by confidentiality obligations. Individual accounts can provide useful leads for further questions, but should not be treated as verified contract terms.

3. Ask the franchisor to explain eligibility and put it in the contract

The Principles require franchisors to provide important franchise information ten days before entering into a franchise relationship or a preliminary franchise relationship, or within a period deemed reasonable in the particular case or agreed by both parties. This information includes fees payable before and during operations, operational assistance and training, and restrictions within the franchise relationship.

These requirements help you understand your own terms, but they do not mean that the franchisor must disclose other franchisees’ complete contracts. A more effective approach is to ask for the fee and support standards applicable to you, together with written answers to these questions:

• What objective eligibility criteria determine access to incentives, and who approves them?
• Which criteria do I currently meet, and what conditions remain outstanding?
• If I meet the threshold later, can I apply for an adjustment, and when would it take effect?
• What fees will apply once an incentive expires or is withdrawn?

One possible negotiating proposal is: ‘Once this outlet meets the eligibility criteria set out in the schedule, the franchisor shall provide the specified support in accordance with the standards in that schedule. If support is refused, the franchisor shall give written reasons.’ The schedule should specify eligibility criteria, supporting documents, processing deadlines and the support to be provided, rather than merely stating ‘subject to the franchisor’s policies’.

This is a contractual arrangement requiring both parties’ agreement, not an entitlement automatically granted by law. Nor should you assume that new incentives introduced in future will necessarily apply to existing franchisees. If you want the opportunity to have your eligibility reassessed, negotiate this before signing.

4. If differences remain unexplained, preserve evidence before deciding what to do next

If the franchisor’s explanations keep changing, or verbal promises of incentives are used to pressure you into signing, first retain quotations, different versions of offers, correspondence and written responses. Separate confirmed facts from other people’s accounts, and record the date and applicable conditions for each piece of information.

The legal issues also need to be assessed separately. Failure to disclose your own material fees in advance may raise issues under the Principles and Article 25 of the Fair Trade Act. Unjustified differential treatment that risks restricting competition may instead engage Article 20. These are separate legal tests and cannot substitute for one another.

A failure to disclose important information as required engages Article 25 only where there is no legitimate justification and the conduct is sufficient to affect trading order. If the franchisor fails to honour an agreed incentive, that may also be a civil matter concerning contractual performance. A lawyer familiar with franchise transactions in Taiwan can assess the evidence and available options. Administrative action by the Fair Trade Commission does not automatically amend your contract or secure a refund for you.

The practical takeaway: compare similar arrangements first, then ask why the terms differ, and finally put eligibility criteria and entitlements into the contract. Clear, verifiable rules offer better protection for a long-term relationship than an assurance that ‘you have the best deal’.