Franchising Your Business in Taiwan: Setting Renewal Criteria, Application Deadlines and Fees

When opening an existing business in Taiwan to franchising, franchisors often focus first on getting outlets open, leaving renewal discussions until several years later. Yet franchisees’ willingness to upgrade equipment, extend their leases and develop store managers depends partly on whether they can continue operating for another term. A clear renewal framework does not promise a permanent relationship. It tells the franchise network when to apply, which criteria will be used and what it will cost to continue trading.

1. Distinguish a right to renew from an opportunity to renegotiate

Simply stating that an agreement ‘may be renewed on expiry’ does not adequately explain either party’s responsibilities. Franchisors should first choose an approach, then ensure their recruitment teams explain it consistently:

• Renewal if the conditions are met: Set out objective eligibility criteria and the circumstances in which the franchisor must accept renewal.
• Renewal subject to a separate agreement between both parties: Franchisees may apply, but the franchisor is not obliged to approve. The assessment factors and response procedure should still be explained.
• Automatic extension: Clearly specify the length of the extension, the deadline for giving notice of non-extension and which terms will continue to apply.

These are possible contractual arrangements, not a single model prescribed by Taiwanese law. Do not tell prospective franchisees that they can ‘keep renewing as long as they keep trading’ while reserving an entirely unrestricted right to refuse renewal in the agreement.

Taiwan does not have a single dedicated franchise statute, but it does have franchise-specific rules. The Taiwan Fair Trade Commission’s Handling Principles for Cases Involving Franchisors’ Business Practices set requirements for franchise disclosures and contracting procedures. Failure to provide important information may breach Article 25 of the Fair Trade Act if it amounts to obviously unfair conduct capable of affecting trading order. The validity of renewal clauses and disputes over their performance must also be assessed under the Civil Code’s contractual provisions, the principle of good faith and other relevant rules.

2. Make renewal eligibility verifiable

Phrases such as ‘good performance’ or ‘meeting brand requirements’ can make approval depend on personal judgement or relationships. Franchisors should translate these into verifiable criteria, such as whether payments are outstanding, whether required licences and permits remain valid, and whether confirmed major operational shortcomings have been remedied.

Each criterion should answer three questions: what period will be reviewed, which records will be used and who will confirm the findings? An isolated customer complaint, an unsubstantiated allegation and a recurring problem that remains unresolved should not all be treated alike.

Consider creating a one-page renewal assessment form with separate sections for:

• Essential eligibility criteria: Conditions that must be met before the franchisee can operate for another term.
• Remediable issues: Missing documents or shortcomings that can be addressed by a specified date.
• Matters for negotiation: Issues requiring further agreement, such as an insufficient remaining lease term or a change of operator.

Assessment results should include specific reasons, with a designated contact or process for requesting a review. If the franchisor decides not to renew because the brand is withdrawing from an area, it should explain that commercial decision honestly rather than look for minor outlet failings to justify it. An objective process protects franchisees and helps prevent different managers from making contradictory decisions.

3. Work backwards from expiry to coordinate applications, leases and decisions

There is no single renewal application deadline suitable for every franchise model. Franchisors should work backwards from the time needed for assessment, premises arrangements and outlet planning, rather than simply choosing an arbitrary date.

The agreement and management calendar should identify at least five milestones: the franchisor’s expiry reminder, the franchisee’s application, submission of any outstanding documents, the franchisor’s written response and both parties’ signing of the agreement for the next term. These are recommendations for designing a process, not uniform statutory deadlines.

The consequences of missing a deadline also need to be clear. Can a franchisee still submit a late application? If the franchisor misses its response deadline, does that merely mean the application remains under review? Do not leave the parties arguing over whether silence amounts to consent.

Premises arrangements need particularly early attention. If franchisees must commit to a long-term lease before applying for renewal, they risk extending their lease without securing the right to continue using the brand. One option is a conditional approval notice identifying the lease or eligibility documents still required. However, the notice must make clear whether it constitutes a binding commitment.

If approval is still pending when the agreement expires, the outlet should not simply continue trading without written arrangements. Where a short transition period is needed, agree its duration, brand-use rights and fees separately, and state whether it affects the formal renewal decision.

4. Explain renewal costs before presenting the next agreement

Renewal fees should not be described merely as ‘subject to the franchisor’s rates at the time’. Where costs can already be established, specify the amount or calculation method. Where they cannot, explain the basis for estimating them, what they cover and how franchisees will be notified. This helps avoid franchisees discovering shortly before expiry that renewal is unaffordable.

Itemising charges is particularly important. Renewal administration, refresher training, system setup and ongoing royalties for the next term should each be explained separately. Paying an initial franchise fee does not automatically mean that the same fee must be paid in full again, nor does it mean renewal must be free. What matters is that both parties know in advance what each payment covers.

Under the Handling Principles mentioned above, important information includes relevant fees before and during operation, restrictions on the franchise relationship, and arrangements for amending, terminating and rescinding the agreement. Any established renewal restrictions and fees should therefore be clearly disclosed during recruitment, rather than introduced only when the agreement expires.

The Principles require important information to be provided ten days before entering into a franchise or preliminary franchise relationship, or within a period considered reasonable in the individual case or agreed by both parties. Before signing, franchisees must also be given at least five days to review the agreement, or a period considered reasonable in the individual case. Whether a renewal involves entering into a new relationship, whether there is an information imbalance and whether any exceptions apply must be assessed against the actual arrangements. Franchisors should not simply assume that ‘existing franchisees do not need another review’. In practice, providing the next agreement, a comparison of changes to its terms and a complete fee schedule gives franchisees time to check the details before deciding.

Practical takeaway: Before opening your business to franchising, prepare a renewal eligibility checklist, a timeline working backwards from expiry and a fee schedule. Letting franchisees see the rules for the next term before they invest is more likely to build a sustainable franchise network than negotiating outlet by outlet when agreements expire.