Research On Franchise Legal System From Economic Law View

Franchise, as a high efficient commercial method, is considered to a fabulous way to expand business or individual entrepreneurship. In more than 100 years since American Singer Sewing Machine Co. first invent this business model, Franchise has brought up a bunch of giant companies, such as Coca Cola, Mcdonalds, KFC, Kodak, and etc., as well as displayed powerful vitality. Among them, just Mcdonalds has founded more than 26800 restaurants in 119 countries and district ions around the world.Although, there are only more than 2 decades since Franchise was led into China, it has been developed swiftly. Some native scholars considered, Franchise was going to be a major business model in 21 century. However, we have to admit that Franchise in China, comparing to foreign countries, remains at an early stage. There are several non-regulated areas within Franchise, which focus on the following aspects: firstly, because of lack of information from franchisor, franchisee is frequently defrauded by franchisor; secondly, because of abuse of dominating position by franchisor, franchisee is restricted from attending fair commercial competition; lastly, because of weak capability of judgment on industry, franchisee haphazardly and hastily invests into franchise, which leads to high failure rate.The foregoing issues are caused by several reasons, such as market mechanism defective or Credit Reporting Systems short. However, incomplete of Franchise legal system has been witnessed as one of key reasons. In fact, China do has set up franchise legal system, therefore issues relating to franchise contract or intellectual property could be solved by Contract Law or Intellectual Property Law. What Franchise business in China really need is the law which could supervise franchise participants, secure the marketing order and guide the industry.Because of the lack of the law mentioned in last paragraph, it leads the author start to think about the franchise legal system from the view of Economic Law. As a business model, why would franchise regulated by Civil Law remains limitation on? Whether Economic Law has rationale and necessity to regulate franchise? If it is, what is the scope and boundary of regulation by Economic Law? How would Economic Law regulate franchise? With these questions, the author begins to compose this dissertation, and finally decide to answer all these questions by five chapters. Constructively, the first two chapters are General, giving the answer to why franchise needs Economic Law. The latter three chapters are–On, giving answer to how Economic Law regulates franchise.GeneralChapter I"The Origin and Rationality of Franchise"Law, which is compulsory enforced, is a sum of code of behavior regulate certain social relation and social order. Since social relation and social order are formed by human behavior, human behavior is one of the most important subject matter of law. Meanwhile, regulative method of law is influenced by human behavior. If people behave voluntarily and spontaneously, their behavior is regulated by arbitrary provisions of law. Otherwise, if people behave involuntarily or non-spontaneously, their behavior is regulated by mandatory provisions of law. Therefore, we have to clarify people's behavior when they attending franchise before we do study on the proper law for franchise. Through research on origin and rationality of franchise, we could find the behavior of franchise attendants, which could help us deduce the possible regulative method of law for that behavior.Through this train of thought, this chapter consists of 4 sections. Section 1 starts from the definition of franchise, and sums up unique characteristic of franchise, comparing to other business models. According to the characteristic of franchise, section 2 analyzes the internal and external reason of origin of franchise. With the achievement of economic theories, franchise is defined as an interim organization from resource allocation research ideas. Section 3, based on organizational aspect of franchise, analyzes the rationality of interim organization in details, which could be summed into two parts. One part is franchise organizational model could reduce transactional cost and organizational cost. The other one is franchise organizational model could raise economic profits and social benefits. With these two rationalities of franchise organizational model, section 4 gives two conclusions. Conclusion one is that the origin of franchise is because it could satisfy people's desire of pursuant profits and attendance into social activities. Conclusion two is people voluntarily and spontaneously invest into franchise with the understanding of the rationalities of franchise.Chapter II"The Necessity of Regulation by Economic Law to Franchise"According to the conclusion that people voluntarily and spontaneously invest into franchise, we could deduct that the law regulating franchise should be mainly in arbitrary provisions. However, this deduction should be reviewed for its correctness. The actual franchising laws and regulations are the most direct and precise way to verify the correctness.This chapter is divided into four sections. Section 1studies both domestic and foreign laws and regulations, which turn out the provisions for franchise are not mainly in arbitrary form as deducted. This phenomenon leads author start to think over the limitation of Civil and Commercial Law in regulating franchise. Section 2 analyzes reasons of the limitation of Civil and Commercial Law. For the general reason, it is because franchise is an enterprise alike interim organization, which includes hierarchy relationship as an enterprise. For the detailed reasons, the limitation of Civil and Commercial are caused by unequal position and non-zero sum Game of franchise attendants, as well as formatted, long-term and relational characteristic of franchise contract. After clarifying those reasons, section 3 confirmed the necessity and rationality of Economic Law from two aspects: one is fundamental theories of Economic Law; the other is current domestic and foreign situation. Furthermore, section 4, based on the necessity and rationality of Economic Law, decides the scope of regulation of Economic Law and the logical order of demonstration how Economic Law regulates in coming Chapters. -OnChapter III"Legal regulation on competition Restrictive behavior in Franchise"Competition restrictive behavior is counted into the scope of microscope regulation field of Economic Law. First of all, we have to clarify what are the main forms of competition restrictive behavior. Then, comparing with foreign legislation, we could make a self-criticism on current regulations in China on competition restrictive behavior, and give well targeted perfect proposal.This chapter is divided into five sections. Section 1 sums main forms of competition restrictive behavior in franchise. Section 2 and section 3 study theory and practice of two most experienced economic entities on regulating competition restrictive behavior. U.S., as a case law country, competition restrictive behavior is regulated case by case. Through research on theoretical development of U.S., we could conclude U.S. legislation trend on regulating competition restrictive behavior in franchise. E.U., as a statute law entity, has stipulated two targeted codes regulating competition restrictive behavior in franchise. Section 3 concentrates on comparison the discrepancy between the two E.U. codes and reasons. Section 4 sums the lessons drawn from E.U. codes as well as insufficiency in anti-monopoly law of China. Section 5 is set into two scenarios. The first one is to enact an brand new code to cure the insufficiency; the second one is to suggest a new standard, which is analogy from adverse possession rule, for judging validity of competition restrict behavior, under current anti-monopoly law in China. The latter suggestion is considered to be novel and practical.Chapter IV"Information Disclosure and Government Supervision System in Franchis"Government supervision is an important component of Economic Law, which is well related to disclosure requirements. Regulating information disclosure in franchise could enhance government supervision. Information disclosure was originated from security market. It is well accepted by public for its effectiveness on formalizing security market. U.S. scholar firstly suggest transplant information disclosure rule into franchise.This chapter is divided into four sections. Section 1 starts with the necessity of establishment of information disclosure rule in franchise. Then, information disclosure rule in franchise is differed from either information disclosure rule in security market or civil duty of disclosure. With the difference listed there, the characteristic of information disclosure rule in franchise has been ascertained. Section 2, with fully consideration of the distinguishing features of information disclosure and government supervision, combining national conditions of our country, make the suggestion to establish market access and compulsory information disclosure system in China. Section 3 discusses detailed way of thought to establish market access system, including: choice between system of examination and approval, ascertaining supervising department of government, designing process of examination, formed request on documents for examination, and information opened to public. Section 4 raise perfecting measures toward inefficiency in current Franchising regulation code, from aspects of time, contents, and format.Chapter V"Macroscopic Legislation in Franchise"Franchise is a business mode which belongs to microscopic economic scope. It is not regulated by macroscopic law directly. However, franchise is capable to combine commercial model and capital together, realizing scale and low-cost expansion. This leverage effect could magnify both positive factors and negative factors to macro-control. Therefore, government has the dynamic to lead franchise into proper industries, endeavor to show the positive effects.This chapter is divided into three sections. Section 1 introduces a profile and purpose of macro-control, and concentrates on influential effect made by franchise to realizing the purpose of macro-control. Section 2 defines the boundary and detailed measures of government guiding behavior, with the purpose of realizing macro-control in franchising fields. Section 3 put macroscopic legislation of franchise into practice, based on the boundary and detailed measures of government guiding behavior defined in section 2.