Franchising in Hong Kong
Economy
Hong Kong has the world's 38th largest economy based on GDP
figures but is world's 10th largest trading entity.
Legislation
There is no specific legislation governing franchising in Hong
Kong. Contract law and laws regulating trade marks and intellectual
property rights impact on the governance of franchising. The Hong
Kong Franchising Association's (HKFA) Code of Ethics provides
guidance to both franchisors and franchisees. This is a voluntary
membership, however once a member, compliance with the
Association's rules and Code of ethics is mandatory.
Franchise Market
The most popular and prevailing sectors in the Hong Kong
franchising industry are catering, retail, photo processing,
laundry, services, IT and educational services. Just under 50% of
the franchises in Hong Kong are owned by international franchisors,
mostly from the U.S. Compared to other Asian markets, the Hong Kong
franchising industry is well established.
Franchise Legislation
- Franchisors are not subject to any registration
requirements.
- The HKFA Code of Ethics imposes a number of obligations on
members and compels both the franchisor and franchisee to provide
disclosure. The franchisor must disclose information material to
franchise agreement within a reasonable time before execution of
any legally binding agreement. The Franchisee must provide full and
frank disclosure: information material to franchisors selection of
a franchisee.
- Hong Kong has no restrictions on investment or exchange control
regulations and no specific franchise legislation.
- Most franchise disputes are determined and decided in
accordance with common law (contract and intellectual property
protection).
Conclusion
Due to the majority of disputes being determined on a common law
basis, it is imperative that franchisors seeking to enter the
franchise market seek experienced, specialist legal advice to
ensure compliance and the enforceability of their proposed
franchise agreements.