1. Introduction
 
Taiwan’s franchise market is fast-paced and highly competitive. Both international and local brands have used franchising to grow quickly here. If you are a foreign brand looking to enter or expand in Taiwan, it is essential for you to understand the local regulations. This knowledge helps you manage risks and build long-term success. In Taiwan, the Fair Trade Commission (公平交易委員會; the “FTC”) is the regulator enforcing the Fair Trade Act (公平交易法; the “FTA”).[1] The FTC’s main goal is to keep the market fair for everyone. A previous analysis of FTC enforcement actions reveals that the most frequent violation involves franchisors concealing or failing to disclose important transaction information. A previous analysis of FTC enforcement actions reveals that the most frequent violation involves franchisors concealing or failing to disclose important transaction information.[2] In this essay, we will look at recent FTC decisions, highlight key lessons, and offer practical compliance strategies. We will point out common legal mistakes and explain the main rules you need to follow when franchising in Taiwan.
 
2. The Regulatory Bedrock
 
Taiwan does not have a single law just for franchises. Instead, several laws and guidelines together govern franchise relationships. The FTA plays a critical role in this regulatory architecture. The FTC is the main authority that enforces these rules. A key source of this power is Article 25 of the FTA, which is a broad, catch-all provision forbidding any deceptive or obviously unfair act that could affect the trading order.[3] To apply this provision specifically to the franchise sector, the FTC relies on interpretive rules, most notably the Fair Trade Commission Disposal Directions (Guidelines) on the Business Practices of Franchisors (公平交易委員會對於加盟業主經營行為案件之處理原則; the “Franchisor Guidelines”).[4] The Franchisor Guidelines clarify the FTC’s enforcement approach, aiming to maintain trading order and ensure fair competition.[5] The FTC views the inherent information asymmetry between a sophisticated franchisor and a prospective franchisee as a source of potential unfairness. To address this, the Franchisor Guidelines require franchisors to do three main things: (1) fully disclose key information, (2) give a set period for contract review, and (3) provide the signed franchise agreement within a certain time. These steps are meant to protect franchisees and keep the market fair. We will look at these requirements in more detail with real case examples in the subsequent paragraphs.
 
3. An Analysis of Recent FTC Decisions
 
Franchisors, both domestic and foreign, often stumble not because of malicious intent, but due to a misunderstanding of the requirements under the FTA and the Franchisor Guidelines. In the following paragraphs, we will dissect the common violations by franchisors in Taiwan based on recent FTC decisions.
 
3.1 False Advertising
 
Before we analyze disclosure failures under Article 25 of the FTA and the Franchisor Guidelines, you must be aware of Article 21 of the FTA. This article prohibits businesses from making any false or misleading representations in advertising that could affect a trading decision.[6] While Article 25 of the FTA and the Franchisor Guidelines deal with what you fail to say, Article 21 of the FTA deals with what you actively and falsely claim. The FTC imposes administrative sanctions on franchisors for using inflated, unverified, or baseless revenue projections to lure in franchisees.
 
In a recent case involving the Niu Lao Bo Market (牛老伯市集) franchise, the franchisor’s introductory presentation claimed its flagship stores had an “average monthly revenue of NT$2.5 million” and its standard stores averaged “NT$1.5 million”.[7] The FTC’s investigation, however, found that the actual average monthly revenue of the referenced stores was lower than advertised. The franchisor could provide no objective data to support its claims, leading the FTC to find the representations false and misleading under Article 21 of the FTA.[8]
 
This case is clear-cut. The main takeaway is that any marketing claims about earnings or performance must be cautious, backed by solid evidence, and easy to verify. If you mention an “average,” you need to have the data and method to prove it.
 
3.2 Failure to Disclose Important Information
 
This is, by far, the most common violation. Point 3 of the Franchisor Guidelines mandates that you must provide prospective franchisees with a set of important information (which includes verifiable digital formats) at least ten days before signing a franchise agreement or entering a “pre-franchise relationship” (預備加盟經營關係). We will explore the definition of a pre-franchise relationship in the subsequent paragraphs. For now, let us focus on the content of the disclosure.
 
The required categories of disclosure are (1) startup costs (all initial fees, such as franchise fees, training fees, and the estimated costs for goods, raw materials, equipment, and decoration), (2) operating expenses (the method for calculating royalties and any other fees for management guidance, marketing, or required purchases), (3) intellectual property rights (the name, scope of use, and any restrictions on the trademarks, patents, copyrights, or any other intellectual property being licensed), (4) operational assistance and training (the content and methods of operational support and training you will provide), (5) territorial plans (your plans for establishing other same-brand franchises in the franchisee’s business territory), (6) restrictions on the franchise relationship (any rules governing the franchisee’s operations, such as mandatory sourcing of goods, minimum order quantities, or required equipment specifications), and (7) contract modification, termination, and rescission (the conditions and procedures for changing, ending, or renewing the franchise agreement).[9]
 
The burden of proving you made this disclosure rests squarely on you.[10] A franchisor’s failure to provide these required disclosures to the franchisee, and if such a failure could affect the trading order, constitutes an obviously unfair act under Article 25 of the FTA.[11] The recent cases reveal several critical themes where franchisors repeatedly fail.
 
3.2.1 Hidden Startup and Operating Costs
 
A frequent complaint is that the actual costs of opening and running the franchise far exceeded the franchisor’s initial estimates. The Franchisor Guidelines require you to disclose the amounts or estimates for all startup costs (e.g., raw materials, equipment) and all ongoing operating costs (e.g., licensing fee, marketing). Vague verbal estimates are insufficient.
 
In the J&G Fried Chicken (繼光香香雞) case, the FTC found the franchisor failed to disclose a slate of ongoing operating costs that only became apparent after the execution of the franchise agreement.[12] These included, for instance, the cost of initial and ongoing inventory and raw materials, monthly fees for public broadcast advertising, and fees for POS system maintenance (after the first year), an online ordering platform, invoice data transmission, and electronic menu maintenance.[13] Similarly, in the Seven-Tea (七盞茶) case, the franchisor failed to disclose (among other required disclosures) that the POS system required ongoing software fees, which franchisees only discovered when the POS system vendor threatened to cut off service a year later.[14] The failure can also be as simple as not providing the information at all. In another case, the franchisor for Zhao Brunch (找餐店Brunch) referenced an “Attachment 3” (listing the initial raw material costs) in the franchise agreement, but the FTC found that the franchisor admitted it never actually provided this attachment, leaving franchisees completely in the dark about their startup costs.[15] Furthermore, in the Macu Tea (麻古茶坊) case, the FTC fined the franchisor for failing to provide prospective franchisees with clear, complete amounts or estimates for the initial and ongoing costs of raw materials.[16] Franchisees reported that they were only told the cost of raw materials as a vague percentage of revenue, and the actual upfront costs far exceeded their expectations, forcing some to take out loans.[17]
 
The main lesson from these cases is that franchisors often fail to disclose the startup, ongoing, recurring, and third-party costs. You must provide clear, documented estimates for everything a franchisee will have to pay, not just your franchise fee.
 
3.2.2 Undisclosed Restrictions on Operations
 
Another major area of failure is not disclosing rules that restrict the franchisee’s operational freedom. The most instructive examples come from Taiwan’s largest convenience store chains, FamilyMart (全家便利商店) and 7-Eleven (7-Eleven便利商店). In the FamilyMart case[18] and the 7-Eleven case,[19] the FTC fined them for failing to disclose their internal policies on “minimum suggested order quantity” (最低建議訂貨量) and “sales-to-inventory ratios” (商品銷進比). The franchisors argued these were merely “suggestions.” However, the FTC’s investigation found that franchisees who ignored these suggestions faced negative consequences. The FTC reasoned that because these “suggestions” directly impacted the franchisee’s order volume, they also impacted potential scrap losses, which were deducted from the franchisee’s remuneration. Therefore, these “suggestions” were deemed critical restrictions that had to be disclosed upfront.[20] This demonstrates the vital “substance over form” principle upheld by the FTC. In addition, these cases establish the rule that any policy of the franchisor (whether labeled as “suggestions,” “best practices,” or anything else) that carries any negative consequences for non-compliance will likely be viewed by the FTC as a mandatory restriction requiring disclosure.[21]
 
This rule extends beyond ordering. In Niu Lao Bo Market, the FTC found the franchisor violated Article 25 of the FTA by failing to disclose a critical policy that allowed the franchisor to additionally assign (額外配給) goods to franchisees, forcing them to accept and pay for items they did not order.[22] This case echoes the lesson from FamilyMart and 7-Eleven. Any policy that impacts a franchisee’s inventory, costs, or autonomy, even if you call it a “suggestion,” must be disclosed as a restriction.
 
3.2.3 Deception Regarding Intellectual Property
 
Perhaps the most alarming violation for any brand-conscious franchisor involves intellectual property. Your brand is the core asset you are licensing. The FTC views any misrepresentation about your right to license that brand as a severe form of deception. In the Tamsui Tai-G (淡水台G店) case, the FTC found that the franchisor for the Tamsui Tai-G soup brand actively recruited franchisees while failing to disclose the critical fact that it did not actually register and own the trademark for its brand name.[23] The franchisor was, in fact, already embroiled in trademark litigation, a fact that the franchisor failed to fully disclose to new franchisees. The FTC determined this was not just a failure to disclose, but a deceptive and obviously unfair act under Article 25 that fundamentally misled franchisees about the core of the bargain.[24]
 
3.3 The Three Critical Timelines
 
Beyond the content of the disclosure, the timing is equally critical. The Franchisor Guidelines set out three critical timelines. First, under Point 3, you must provide the disclosure package at least ten days before the franchisee signs any agreement or pays a non-refundable fee. While the Franchisor Guidelines permit a different agreed-upon timeline, following the ten-day rule is the safest option. Second, Point 4 requires you to provide the final franchise agreement to the franchisee for a five-day review period before signing. Third, Point 4 also obligates you to deliver the executed franchise agreement to the franchisee within thirty days after execution.
 
It is crucial to distinguish between the ten-day disclosure period and the five-day review period, both of which are pre-contractual. The ten-day period is for reviewing the important information package (e.g., costs, intellectual property, restrictions) before signing any document or before any non-refundable money changes hands.[25] The five-day period is for reviewing the final franchise agreement before signing.[26]
 
You must comply with all three timing requirements. If you fail to comply with any of them and your failure could affect the trading order, the FTC will consider your non-compliance as a violation of Article 25 of the FTA.[27] The primary consequence is the administrative sanctions (e.g., fines and corrective orders) imposed by the FTC under Article 42 of the FTA. However, in civil court, this violation does not automatically invalidate the franchise agreement, though it could be a factor in a broader dispute.
 
A common mistake is to collect a deposit before providing the required information. The Franchisor Guidelines specifically define the concept of a “pre-franchise relationship” (預備加盟經營關係).[28] You trigger this legal status the moment you, the franchisor, accept any form of payment (e.g., a deposit, an intent fee) from a prospective franchisee and sign any preliminary document (e.g., an intent letter, a reservation form) that includes a penalty for withdrawal, such as forfeiture of the deposit.[29] Under Point 3 of the Franchisor Guidelines, the ten-day information disclosure clock starts before the pre-franchise relationship is formed. Therefore, you must provide the complete disclosure package and wait at least ten days before accepting any money tied to a non-refundable condition. In a 2025 case involving Jia Yuan Scallion Pancake (佳元蔥油餅舖), the FTC found the franchisor violated Article 25 of the FTA because the franchisor had the franchisees sign a letter of intent and pay a non-refundable deposit before providing all of the required franchise information.[30]
 
4. Compliance Strategies
 
Based on the regulatory framework and the foregoing case analysis, we offer the following strategies to minimize your risk when franchising in Taiwan.
 
4.1 Create a Taiwan-Specific Disclosure Document
 
We encourage you to create a Taiwan-specific disclosure document. Please do not simply translate your home jurisdiction’s franchise disclosure document. Your disclosure materials should be structured to map directly onto the seven categories of information required by the Franchisor Guidelines. The FTC has published a detailed checklist that breaks down each category into numerous sub-items.^[31] You can use this checklist to ensure each item receives specific attention. This demonstrates your clear intent to comply with local regulations and makes it easy for regulators to verify your compliance.
 
4.2 Document Everything
 
It is a good practice to document every step of the disclosure process. Under Point 3 of the Franchisor Guidelines, the burden of proof is on you to show that you provided the information in a timely manner. Please use methods that create a clear trail. For instance, you can have the prospective franchisee sign and date an acknowledgment receipt for the disclosure package. If you provide the information electronically, you can use an email service with read receipts or a secure data room that logs access dates and times.
 
4.3 Implement a Strict Pre-Signing Procedural Checklist
 
Following clear procedures is your best protection. Your team must understand and follow three bright-line rules: (1) you should not collect non-refundable deposit until the 10-day information disclosure period has fully elapsed; (2) you should not sign the final franchise agreement before the 5-day contract review period is over; and (3) you should always deliver the executed franchise agreement to the franchisee within thirty days following execution. It is a good idea to create an internal compliance checklist to track these dates for every franchisee.
 
4.4 Audit Your Suggestions for Hidden Restrictions
 
FamilyMart and 7-Eleven show that the FTC will treat any operational “suggestion” with negative consequences for non-compliance as a mandatory restriction requiring disclosure. You must disclose any policy that restricts the franchisee’s autonomy, such as the additional goods assignment (額外配給商品) policy in Niu Lao Bo Market, which forced franchisees to accept and pay for items they did not order. We urge you to review all your manuals and guidelines. If a “suggestion” is actually mandatory, you must disclose it.
 
4.5 Disclose All Ongoing Third-Party Technology Fees
 
Cases like J&G Fried Chicken and Seven-Tea reveal that the failure to disclose ongoing technology costs is a common problem. Your disclosure document should list all recurring fees the franchisee must pay, especially those paid to third-party vendors you designate. This includes POS system software and maintenance, online ordering platform fees, delivery app costs, and data transmission fees. Please do not assume the franchisee will know about these.
 
4.6 Conduct a Taiwan-Specific Intellectual Property Audit
 
Tamsui Tai-G is a severe warning. Before you begin the disclosure process, you must make sure that your trademarks and other applicable intellectual property are registered and valid in Taiwan. You must disclose the precise status, registration number, and any restrictions on using these rights in Taiwan. Concealing any ongoing intellectual property dispute can lead to an FTC administrative sanction for deception.
 
4.7 Be Wary of Non-Disclosure Excuse
 
Point 3 of the Franchisor Guidelines provides very limited exceptions for non-disclosure. These exceptions include (1) the continuation or expansion of an existing franchise relationship (e.g., an existing franchisee opening another store), (2) when information is objectively unavailable, and (3) when there is no information asymmetry. Saying something is a “business secret” is not a valid justification for you to withhold important financial or operational information.[32] You must disclose every material information that a prospective franchisee needs to make an informed investment decision. The safer and more prudent course of action is always to disclose. If you are concerned about protecting your sensitive information, you can have the franchisee sign a confidentiality agreement before your disclosure.
 
5. Conclusion
 
The regulatory landscape for franchising in Taiwan, as enforced by the FTC, places a heavy emphasis on fairness and transparency before a franchisee commits. This is a framework designed to foster healthier, more sustainable franchise relationships built on trust. You should carefully follow the requirements for information disclosure, contract review, and contract delivery, and avoid false advertising. As recent cases (from Niu Lao Bo Market for false advertising, Tamsui Tai-G for intellectual property deception, and numerous others like J&G Fried Chicken and Macu Tea for hiding costs) show, the FTC is scrutinizing franchisor conduct from all angles. No franchisor is exempt from these fundamental rules. By preparing a Taiwan-specific disclosure document, keeping good records, and making sure your team follows the required timelines, you can set up a strong and successful franchise in Taiwan. Being transparent and proactive is not only a legal necessity. It is also the best way to build trust and long-term partnerships with your franchisees.