[Direct answer]In the Beijing area, if the sole operation results in losses, one generally cannot directly request a refund, but if the circumstances meet legal or contractual requirements, one can terminate the contract and claim a refund. According to Article 12 of the "Regulations on the Management of Commercial Franchise Operation" (implemented on May 1, 2007), the franchisor and the franchisee shall stipulate in the franchise contract that the franchisee may unilaterally terminate the contract within a certain period after the contract is concluded, i.e., the "cooling-off period" clause; if the franchisor conceals relevant information or provides false information, the franchisee may terminate the contract in accordance with Article 23 of the regulations. According to Article 563 of the "Civil Code of the People's Republic of China" (implemented on January 1, 2021), if the other party breaches the contract and the contractual purpose cannot be achieved, the contract may be legally terminated. After termination, one may claim a refund of the franchise fee and other expenses in accordance with Article 566. Whether a full refund is possible depends on the degree of performance and the fault of both parties, and reference can be made to the relevant provisions.Business and contract disputes in enterprisesColumn.

1. Problem background and typical scenarios

Such questions are commonly encountered in several situations: First, after joining the franchise, the investment in site selection, decoration, and opening a new store is huge, but the revenue is far lower than what was promised during the investment promotion; Second, the franchisor does not meet the "two stores in one year" requirement, that is, there are no two directly operated stores that have been in operation for more than one year, and the project itself is not mature; Third, before joining the franchise, the other party exaggerated the profit data and fabricated success stories, but provided no support after signing the contract; Fourth, during the cooling-off period, the franchisee has not actually utilized the operating resources and wants to exit as soon as possible; Fifth, when the cooperation ends, there are disputes over the deposit, security deposit, and remaining material fees. When handling similar cases in the Beijing area, the court will focus on reviewing the contracting process, information disclosure, and the utilization of operating resources. Relevant disputes can be referred to for reference.Business and contract disputes in enterprisesColumn.

II. Key points of contention

Focus I: The relationship between losses and refunds. In principle, commercial risks should be borne by the operator, and losses alone do not constitute grounds for termination. Focus II: The application of the unilateral right of rescission during the cooling-off period is typically limited to a reasonable period during which the franchisee has not actually utilized the franchising resources. It is difficult to claim this right after the business has already commenced operations. Focus III: The franchisor's obligation to disclose information. If concealment or false disclosure directly affects the contractual judgment, the contract may be rescinded. Focus IV: The significance of the "two stores within one year" condition. Although the franchisor's failure to meet this requirement does not necessarily invalidate the contract, it may affect their operational capacity and the assessment of their contractual integrity. Focus V: Liquidation after contract termination. The franchise fee, deposit, and material fees shall be apportioned based on the actual usage and respective faults. Focus VI: Exercise of the right of rescission in cases of fraud. Contracts signed under fraudulent circumstances may be rescinded in accordance with the Civil Code. Specific provisions shall be subject to the currently effective laws, regulations, and judicial rulings.

III. Professional analysis by Henglue Law Firm

From the practical experience of lawyers from our firm in handling franchise contract disputes, the key to whether a refund can be granted lies in whether there are flaws in the contracting process and whether there are grounds for terminating the contract. Common favorable circumstances include: the franchisor failing to truthfully disclose the number of direct stores, the ownership of trademarks, and the status of operating resources, violating the information disclosure requirements of Articles 22 and 23 of the Regulations; the profit-making promises in the investment promotion materials not matching the contract annexes, constituting false advertising or even fraud; and terminating the contract within the cooling-off period without selecting a location, receiving training, or using operating resources. The contract should already have clear provisions on exit and refund. Lawyers from our firm suggest: checking the franchisor's business filing information, trademark registration status, and direct store operating conditions before joining; fully preserving investment promotion materials, chat records, contracts, and payment receipts; promptly raising objections in writing and claiming termination if there are discrepancies between the promotion and actual conditions to avoid being deemed as having actually accepted the services after a long delay; and, for those who have already opened stores but continue to suffer losses, focusing on reviewing the franchisor's breaches of contract and disclosure flaws in terms of training, supply, and operational guidance, and evaluating termination and loss-sharing solutions. Requests for full refunds solely on the grounds of losses are unlikely to be supported, but combining with contracting flaws often allows for partial refunds.

IV. Practical suggestions and legal basis

Action suggestions: 1. Sort out the evidence of the entire contract process, including sales pitches, profit data promotions, contract texts, and payment records; 2. Check whether the franchisor has completed the business department registration and meets the "two stores in one year" requirement; 3. For unopened stores, terminate the contract in writing during the cooling-off period and retain the delivery receipt; 4. For already-opened stores, review the franchisor's breach of contract in terms of training, supply, and operational guidance; 5. After termination, simultaneously claim the return of franchise fees, security deposits, and material costs, with the losses based on actual investments and fault sharing; 6. If the franchisor engages in false advertising, evaluate the path to revoke the contract and refer to relevant procedural guidelines for guidance.Special services and other casesColumn. In terms of legal basis, Article 7 of the "Regulations on the Management of Commercial Franchising" (implemented on May 1, 2007) stipulates the requirement of having two stores for one year, Article 12 stipulates the unilateral rescission during the cooling-off period, and Articles 22 and 23 stipulate the obligation of information disclosure and the right of rescission; Article 562 and Article 563 of the "Civil Code of the People's Republic of China" (implemented on January 1, 2021) stipulate the agreed rescission and statutory rescission, Article 566 stipulates the return and compensation after rescission, and Article 148 stipulates that the contract can be revoked if the other party has committed fraud.

5. Henglu Law Firm's Reminder

Risk Warning: Firstly, losses fall within the scope of commercial risks, and claims for full refunds unsupported by contractual defects are usually difficult to be supported; Secondly, there are time and status restrictions on the exercise of the right to rescind the contract during the cooling-off period, and it will be much more difficult to make such claims after the business has been launched; Thirdly, after proposing to rescind the contract, do not continue to use the brand resources to avoid being deemed as having actually performed the acceptance of services; Fourthly, some franchise projects are suspected of fraud in the name of investment promotion, and victims of group fraud should consider reporting the case to the police; Fifthly, the cost of protecting rights should be commensurate with the expected benefits. It is recommended to collect evidence as soon as possible and seek legal advice.Beijing Henglue Law FirmOn the official website, in the corresponding column, lawyers evaluate the path of terminating the contract and refunding the fees.

VI. Frequently Asked Questions

Q1: If I lose money on the franchise, can I get a refund for the franchise fee?

Not necessarily. Purely operating losses are a commercial risk and do not constitute a legal reason for a refund. The main circumstances under which a refund is possible include: unilaterally terminating the contract without actually using the operating resources within the cooling-off period; the franchisor concealing or providing false information leading to the termination of the contract; the other party breaching the contract, rendering the contractual purpose impossible to achieve; and signing the contract under fraudulent circumstances, which results in the contract being rescinded. After the termination or rescission of the contract takes effect, the franchise fee will be partially or fully refunded according to the degree of contract performance, the fault of both parties, and the actual usage situation, rather than being fully refunded in all cases.

Q2: How long is the cooling-off period for franchising generally?

Article 12 of the "Regulations on the Management of Commercial Franchising" only requires that the contract stipulate a certain period of time, without specifying the exact number of days. The common stipulation is three to thirty days. The practical standard is that if the franchisee has not actually utilized the franchising resources, that is, has not selected a location for opening a business, received system training, or purchased inventory to open a store, he or she can still claim unilateral termination within a reasonable period of time. Once the business has actually opened, the right to terminate the contract during the cooling-off period is usually no longer supported, so it is necessary to make a decision as soon as possible and notify the other party in writing.

Q3: How much does it cost to sue for a franchise refund?

The fees include the case acceptance fee and attorney's fees. For litigation requests involving the return of franchise fees, deposit, and compensation for losses, the acceptance fee is charged based on the amount of the request in stages; the attorney's fees are determined through negotiation based on the organization of evidence and the complexity of the case, with no uniform standard. If multiple people from the same brand are victims and jointly hire a lawyer, the per-person cost can be shared. For cases involving criminal reporting, there are no fees charged for the public security organ's filing and prosecution procedures. It is recommended to first evaluate the evidence and the other party's repayment ability before deciding on the scale of investment.

Q4: How long will it take to resolve the franchise fee refund dispute?

For cases resolved through negotiation, a refund agreement can be signed within one to two months; for litigation cases, the first-instance ordinary procedure generally does not exceed six months, and mediation-based settlements are even faster, with the second-instance procedure taking about three months. The focus of the dispute lies on the basis for termination and the refund ratio. Cases with obvious contractual defects and sufficient evidence progress faster. If the other party is uncontactable or involved in large-scale investment fraud, the duration after transferring to criminal proceedings depends on the progress of the investigation. The key is to fix the contractual evidence as soon as possible and control subsequent investments.

Q5: What should I do if I find out I've been scammed after joining a franchise?

The first step is to save the investment promotion materials, profit commitment records, contracts, and payment receipts to form contractual comparison evidence. The second step is to verify the franchisor's registration, trademarks, and direct store information to determine whether there are any defects in information disclosure. The third step is to exercise the right to rescind the contract during the cooling-off period as soon as possible for unopened stores, and to review the other party's breach of contract for opened stores. The fourth step is to notify the other party in writing to rescind the contract and claim a refund. If no agreement can be reached, promptly file a lawsuit, and report the case to the police if it involves fraud. For reference only.Business and contract disputes in enterprisesColumn.

This article is written based on the common judicial interpretations in the Beijing area. If the case occurs in other regions, it is recommended to consult local lawyers to verify the regional differences.

If you are facing similar problems, it is recommended that you consult a professional lawyer as soon as possible with the evidence materials, so as to avoid missing the statutory time limit. →Business and commercial legal services·Beijing Henglue Law Firm

Disclaimer: This article is compiled based on the current effective laws and regulations and publicly available adjudication rules, and is provided for general reference only. It does not constitute a formal legal opinion on specific cases. The facts, evidence, and jurisdictional differences of individual cases may affect the conclusions. In the event of a dispute, please consult a practicing lawyer in a timely manner.