A Guide to Franchise Relocation Clauses in Taiwan: Checking Approval, Repeat Fees and Temporary Closure Arrangements

When buying into a franchise in Taiwan, many people assess only whether they can open at the initial address. They overlook another question: if the landlord refuses to renew the lease, the property needs repairs or the location is no longer suitable, can they retain their franchise rights? For prospective franchisees, relocation involves more than transport and fitting out new premises. It also raises questions about the franchisor’s approval, the authorised location and ongoing payment obligations. These are worth resolving before signing the initial agreement.

1. Check whether franchise rights are tied to a specific address

When reading the agreement, look for clauses covering ‘business premises’, ‘authorised location’, ‘relocation’ and ‘cessation of trading’. Do not assume that permission to continue using the brand means you can choose a new location yourself. Even a move nearby may require a fresh assessment.

Ask the franchisor to answer three questions in writing:

• Is relocation treated as an address change under the existing agreement, or must you submit a new franchise application?
• In what circumstances can you apply, such as lease expiry, property safety issues or operational needs?
• Who grants approval, what documents are required and when will you receive a written decision?

The phrase ‘subject to the franchisor’s consent’ does not, by itself, explain the approval criteria. You can ask for the assessment factors to be listed, such as floor area, electricity supply, drainage, footfall and distance from existing outlets, and agree that specific reasons must be given for any refusal. These are protections you can negotiate, not relocation rights that franchisees necessarily enjoy under the law.

If the franchisor merely promises to ‘help when the time comes’, ask for clarification: are help with finding premises, assessment of the new site and formal relocation approval three separate processes? Do not commit to non-refundable expenditure on new premises on the strength of preliminary verbal feedback alone.

2. Check relocation restrictions alongside disclosure rules

Taiwan is not without franchise regulation. The Fair Trade Commission has issued the Fair Trade Commission Disposal Directions (Guidelines) on the Business Practices of Franchisors. These operate alongside Article 25 of the Fair Trade Act to address obviously unfair conduct in franchise recruitment and operations. Issues such as contractual performance and damages must also be assessed under the Civil Code and other relevant provisions.

The Guidelines require franchisors to provide important information in advance, including fees payable during operations, restrictions on the franchise relationship, and the conditions and procedures for amending, terminating or rescinding the agreement. If relocation requires approval, payment of fees to the franchisor or a replacement agreement, include those requirements in your checks rather than simply looking for references to relocation in recruitment materials.

The Guidelines specify that this information should be provided ten days before entering into a franchise or preliminary franchise relationship, within a period considered reasonable in the particular case, or within a period agreed by both parties. This is separate from the requirement to allow at least five days before signing for review of the agreement, or a period considered reasonable in the particular case.

Failure to disclose a restriction does not mean the franchisee may relocate unilaterally, nor does it automatically invalidate the agreement. Whether Article 25 of the Fair Trade Act has been breached still depends on the specific conduct and whether it is sufficient to affect trading order. Civil rights and remedies require a separate assessment. Franchise transactions are generally not consumer transactions, so do not assume that the protections of the Consumer Protection Act apply directly.

3. Separate relocation costs from any restart of the contract term

Ask the franchisor for a relocation cost schedule, with separate entries for site assessment, design, building works, equipment dismantling and installation, system configuration and retraining. It should identify who receives each payment, how it is calculated and the payment terms. Not every item will necessarily apply; the aim is to avoid new payment demands emerging only after approval has been granted.

In particular, clarify whether relocation will trigger another initial franchise fee or require an increased security deposit. ‘Opening again’ is an operational description, not a substitute for a specific basis for charging fees.

Compare two possible arrangements:

• Keeping the existing agreement: The remaining term stays the same, leaving less time to recoup the relocation investment.
• Signing a new agreement: The term may restart, but fees, obligations and exit conditions may also change.

Ask the franchisor for a list of changes rather than checking only the new outlet’s address. Even if no further initial franchise fee is charged, the overall burden may rise if the new agreement increases fixed monthly fees. Your own budget should also include overlapping rent on both premises, removal costs, staffing arrangements and cash requirements during the closure period.

4. Agree temporary closure arrangements and what happens if relocation fails

Relocation often creates a gap between closing the old outlet and opening the new one. The agreement should clearly define the start and end dates of the authorised closure, its maximum duration and how to request an extension if building works or approvals are delayed.

Check, item by item, whether fixed royalties, system fees and other recurring charges remain payable during this gap. If any reductions or waivers are available, put the eligibility conditions in writing rather than leaving them to ‘discretion’. Also ask whether the closure will affect operational performance assessments or trigger breach provisions for failure to trade continuously.

Finally, agree a sequence of steps if the move cannot proceed. Can you propose another address if the first is rejected? Does the franchisor’s approval expire? If you cannot find suitable premises in time, can you negotiate termination, and how will site assessment or design fees already paid be settled? Expiry of the lease does not necessarily release you from your obligations under the franchise agreement. The two contracts need to be checked separately.

Practical takeaway: Before signing, prepare a one-page checklist covering ‘who approves, what fees apply, how long the outlet can close and what happens if the move falls through’. Ask the franchisor to respond to each point in writing, then incorporate the answers into the agreement or an appendix. Clear relocation arrangements make a future move an option you can assess, rather than a last-minute renegotiation.