Franchising in Taiwan: How to Build a Disclosure File and Keep Proof of Delivery

Opening an existing business in Taiwan to franchisees requires more than an attractive brand brochure. Prospective franchisees need to understand the actual costs, operating restrictions and exit conditions. The franchisor, meanwhile, must be able to show what information they received before making a decision. A disclosure file with version control, a designated owner and delivery records is a practical starting point for building trust across a franchise network.

1. Distinguish disclosure from contract review

Taiwan has no single statute governing franchising, but that does not mean the sector is unregulated. The Taiwan Fair Trade Commission’s Principles for Handling Cases Involving Franchisors’ Business Conduct are an important basis for its handling of franchise cases. Concealing material transaction information may breach Article 25 of the Fair Trade Act if it constitutes obviously unfair conduct capable of affecting trading order. Contractual rights and obligations are also governed by general legislation, including the Civil Code.

The relationship between a franchisor and a franchisee is a business-to-business transaction, not a consumer relationship under the Consumer Protection Act. Consumer protection mechanisms should therefore not be applied directly to franchise recruitment.

Under the Commission’s rules, material franchise information should be provided ten days before a franchise or preliminary franchise relationship is established, within a period deemed reasonable in the circumstances, or within a period agreed by both parties. Failure to provide it without proper justification may raise compliance issues. In practice, franchisors should make complete delivery at least ten days in advance their internal default, rather than treating a shorter period as a recruitment shortcut.

This is separate from the requirement to allow at least five days before signing for contract review, or a period deemed reasonable in the circumstances. Simply saying that the contract has been supplied does not prove that all seven categories of information have been fully disclosed. Equally, receiving the disclosure file does not mean that contract review has been completed. Where non-refundable payments, letters of intent or similar arrangements are involved, disclosure should not automatically be left until the formal franchise agreement stage.

2. Create a master file covering seven categories

Do not leave key terms scattered across presentations, quotations and messages. Create a master disclosure file with a contents page, preparation date, version number and the outlet format to which it applies. Organise it under these seven categories:

• Pre-opening costs: List the amounts or estimated amounts payable to the franchisor or designated parties for franchise fees, training, equipment, fit-out, initial stock and similar items.
• Ongoing operating costs: Set out how royalties are calculated, along with continuing expenditure on operational guidance, promotion, purchasing and other items.
• Intellectual property: Identify the trademarks, patents, copyright or other rights involved, including the scope of permitted use and any restrictions.
• Operational assistance and training: Explain what is provided and how it is delivered, rather than relying on phrases such as ‘comprehensive support’.
• Territory plans: Explain the franchise network’s operating plans or proposed outlet openings within the area where the franchisee’s outlet will be located.
• Operating restrictions: Include designated suppliers, brand specifications, minimum order quantities, and restrictions on equipment and fit-out.
• Contract changes and exit: Set out the conditions and procedures for amending, terminating or rescinding the agreement.

For each category, add references to the relevant attachments and contract clauses to make cross-checking easier. Estimated costs should state the basis of the calculation and what is included or excluded. Where details remain uncertain, explain the current position and the factors that could change it. Do not use blank spaces or ‘to be agreed’ to obscure known financial commitments.

The disclosure file need not reveal complete recipes or confidential manuals. However, confidentiality is not a reason to omit material transaction terms that could affect a prospective franchisee’s decision.

3. Make every delivery record reproducible

The Commission permits information to be supplied on paper, by email, on electronic storage devices, through social media or via messaging applications. The franchisor should be able to produce evidence that it was supplied. The key issue is therefore not which communication tool is used, but whether the delivery and its contents can be reconstructed later.

Keep a separate file for each prospective franchisee containing four sets of records:

1. Recipient details: Their name, contact details and the proposed franchise entity on whose behalf they received the documents.
2. Complete contents: The actual master file and all attachments sent, not merely their filenames.
3. Delivery records: The time sent, the channel used and confirmation of receipt. For paper delivery, include a list of the documents handed over.
4. Follow-up correspondence: Questions raised, the franchisor’s replies, supplementary documents and records of corrections.

A screenshot containing only ‘received’ will rarely establish exactly what the recipient received. If documents are delivered through a cloud folder, keep a snapshot of its contents at the time, so that later updates do not make the original version impossible to identify. These are evidence-management recommendations, not prescribed statutory formats.

An acknowledgement of receipt is not a liability waiver either. A statement such as ‘I understand all risks’ cannot replace specific disclosure, nor should it be used to discourage further questions.

4. Establish update procedures and checks before proceeding

Appoint one person to manage the master file and collect updates from finance, operations and recruitment staff. This helps prevent different teams from sending different versions. For each revision, record what changed, when it takes effect, which outlet formats it affects and which prospective franchisees need updated documents.

For example, suppose a prospective franchisee has received an equipment budget and the franchisor subsequently decides to require additional equipment. The new requirement should not simply be slipped into an attachment to the formal agreement. Proactively explain the changes and revised amounts, retain evidence of the updated delivery, and consider whether the planned signing date still leaves adequate time for assessment. Seek Taiwanese legal advice before making material changes.

Before proceeding with an agreement or a payment arrangement that could establish a preliminary franchise relationship, internal checks should answer at least these questions: Are all seven categories complete? Can the attachments be opened? Does the version delivered match the proposed terms? Have the relevant time periods and outstanding questions been checked? If information is missing, supply it first rather than relying on recruitment staff’s verbal assurances that it will be dealt with later.

Practical takeaway: Start with a master file covering the seven categories, then keep a record for each prospective franchisee of what was delivered, when it was delivered and what changed afterwards. A clear, traceable disclosure process offers both sides of the franchise relationship better protection than a broad acknowledgement statement.