[Direct answer]Yes, there are three paths. According to the Regulations on the Management of Commercial Franchising, the franchisor shall, at least 30 days before the conclusion of the contract, disclose the required information in writing to the franchisee (including the franchisor's basic situation, registered trademarks and business models, operating resources, recent financial and litigation situations, and the operating conditions of franchise stores), and provide the text of the franchise contract. If the franchisor conceals relevant information or provides false information, the franchisee may terminate the contract and request a refund for the unperformed part of the contract and compensation for losses. The other two paths are: first, the cooling-off period clause - within a reasonable period stipulated in the contract (or within a reasonable period even without a stipulation but before the franchisee actually utilizes the operating resources), the franchisee may unilaterally terminate the contract and refund the unused portion of the fees; second, lack of qualifications - if the franchisor does not meet the condition of "having at least two directly operated stores and operating for more than one year" (two stores for one year) or fails to register with the competent commercial department, the contract's effectiveness and the determination of fault shall be favorable to the franchisee. If it constitutes fraud, the contract may be rescinded and compensation may be claimed. In practice, the most common reason for terminating the contract is the failure to disclose true operating data (exaggerating the profitability of a single store).

I. Problem background and typical scenarios

At the investment promotion meeting, the sales pitch of "a monthly sales volume of 300,000 yuan per store and a payback period of eight months" convinced entrepreneurs to sign 300,000 yuan franchise contracts. However, after the store opened, they found that many existing franchisees of the same brand were suffering from massive losses. When they demanded a refund, the franchisor presented a signed confirmation letter stating that they had "fully understood the disclosed information". The focus of the franchise dispute has always been the confrontation between the disclosure obligation and the confirmation letter, with information asymmetry being the franchisor's core weapon. Interestingly, the law precisely designed the obligation to break the information asymmetry.

II. Key points of contention

Firstly, the scope of information disclosure and the determination of "material information"; Secondly, the conditions and cost compensation for unilateral rescission during the cooling-off period; Thirdly, the evaluation of the effectiveness of the one-year time limit for two stores and the registration defects; Fourthly, the conflict of effectiveness between investment promotion publicity and contract terms.

III. Professional analysis by Henglue Law Firm

The first layer is a checklist review of disclosure obligations: the disclosure items listed in Article 22 of the Regulations—the franchisor's name, address, and qualifications; operating resources (trademarks, patents, proprietary technologies); business models and guidance programs; product and service quality standards; operating conditions (including the distribution of direct stores and franchise stores); financial and litigation records in the past two years; and a list of franchise fees. The review process involves comparing each item with the "written disclosure materials provided within 30 days prior to signing the contract." Oral promotions do not count as disclosure, and signing a confirmation letter does not necessarily exempt the franchisor from undisclosed obligations. False disclosure (such as falsifying the number of direct stores or exaggerating profit data) is the strongest ground for contract termination and claims. The second layer is the application of the cooling-off period: Article 12 of the Regulations requires that the contract stipulate that the franchisee may unilaterally terminate the contract within a reasonable period. For those who have not actually opened a store, received training, or used operating resources, claims for the cooling-off period are most effective and result in higher refund rates. However, it is difficult to assert reverse claims for those who have already opened and operated a store, which shifts the focus to false disclosure and fraud. The third layer leverages qualification and filing requirements: two stores operating for one year are the entry criteria for franchising. While the absence of these requirements does not necessarily invalidate the contract, it reflects the franchisor's lack of performance capability. Judicial practice often recognizes this as "concealing major information" or affecting the contract's purpose, supporting claims for contract termination and refunds. Administrative penalty records and litigation preservation records (e.g., searching for the franchisor's litigation history on the China Judgments Online platform) also serve as evidence for the franchisee. The fourth layer involves compensation and settlement structures: after terminating the contract, refunds are calculated based on the unperformed period, and damages for decoration, rent, and business interruption are claimed based on fault. In cases of fraud, the franchisee may request contract rescission and full refunds plus compensation. For bulk franchisee litigation, sharing evidence and negotiating leverage through pre-litigation letters often leads to settlements and refunds. The time sensitivity of franchisee protection is critical—identifying deviations from promised operating data immediately. Preserving marketing materials, meeting recordings, contracts, and payment receipts serve as the foundation for all subsequent legal actions. For entrepreneurs, conducting due diligence before signing the contract (e.g., visiting direct stores, interviewing franchisees, and searching for court judgments) costs just one week but provides the most affordable insurance against risks.

IV. Practical Suggestions and Legal Basis

The first step is to require the franchisor to provide written disclosure materials and verify the registration status of the two stores for one year before signing the contract. The second step is to fix the evidence of advertisements, recordings, contracts, and payments as soon as possible after discovering any issues. The third step is to exercise the right of withdrawal during the cooling-off period or send a termination notice on the grounds of false disclosure, claiming a refund of the franchise fee and compensation for losses. The fourth step is to sue if no agreement is reached, and in the case of fraud, claim the rescission of the contract, a full refund, and compensation. Joint actions for collective rights protection will also be taken. The main legal basis includes: Article 12 of the "Regulations on the Administration of Commercial Franchise Business" (effective May 1, 2007) regarding the unilateral rescission during the cooling-off period; Articles 21 to 23 regarding the obligation of information disclosure and the right of rescission; Articles 7 and 8 regarding the requirement of two stores operating for one year and registration; Article 148 of the "Civil Code of the People's Republic of China" (effective January 1, 2021) regarding the rescindability of fraudulent contracts; and Article 563 regarding the statutory right of rescission. Specific applications shall be subject to the currently effective provisions.

5. Henglue Law Firm's Reminder

Franchise Anti-Scam Tips: Disclosure Must Be in Writing, Verify the Identity of the Two Stores, Use the Cooling-Off Period, and Keep Records of Promotional Materials—The side of the franchisee where the information gap is flattened by law is the side of the franchisee. For disputes involving franchising and franchising, you can seek resolution through legal channels.Business and contract disputes in enterprisesObtain a comprehensive solution for the service; for disputes involving brand and trademark licensing, it can be combined with other legal services.Intellectual property protection and corporate lawPlate; for those involving other commercial disputes, you can refer to it for reference.Special servicesColumn; for matters related to the implementation of refunds, please consult usCreditor's rights and debts, and enforcementTeam.

VI. Frequently Asked Questions

Q1: Can I still terminate the contract if I've signed the "Acknowledgment of Disclosure" confirmation form?

Yes. The confirmation letter cannot replace actual disclosure. The right to rescind the contract due to concealment or false disclosure still exists. On the contrary, the confirmation letter may become evidence against the other party for failing to make a substantive disclosure.

Q2: Can I get a full refund for the franchise fee?

For those who have not utilized the operating resources, most of the fees can be refunded during the cooling-off period; for those who have already started their businesses, they can seek compensation through false disclosure or fraudulent means, and the balance after conversion during the performance period plus the losses will be compensated.

Q3: What should I do if the franchisee doesn't have two direct-operated stores?

If a business violates the admission requirements of the two stores within one year, it can be used as a reason for terminating the contract due to concealing major information and claiming damages. At the same time, the business can report the violation to the competent commercial department.

Q4: Are the profit data advertised by Zhaoshang Investment a promise?

The specific profit-making promises determined shall constitute part of the contract. If the actual profit differs greatly from the promised one, it shall be dealt with as false advertising and fraud, and the promotional materials shall be key evidence in this regard.

Q5: How long is the cooling-off period usually?

The law does not set a fixed time limit. It is measured by the "reasonable period before the actual utilization of business resources". If there is an agreement in the contract, it shall be in accordance with the agreement. In practice, it varies from several weeks to several months.

The above Q&A is mainly based on the judicial practice in Beijing. There may be differences in the adjudication standards in different regions. It is recommended to consult a professional lawyer based on the specific circumstances of the case.

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

Disclaimer: This article is compiled based on the current effective laws and regulations and open adjudication rules, and is 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 case of disputes, please consult a practicing lawyer in time.