A franchisor is able to expand its business in a relatively short period of time. The main disadvantage will be the loss of control over the day-to-day operation.

On the other hand, a franchisee will benefit from the franchisor's experience and use its capital investment in the most cost-effective way. It will save costs from bulk purchasing and effective advertising and promotion of the business. However, the franchisee will have to make periodical payments to the franchisor and will inevitably be subject to a certain extent of restriction and control from the franchisor.

Are there any risks involved in franchising?

Yes. The franchisee may not be capable of running its business properly, or it may not be sufficiently capitalised. In addition, the franchisor might fail to maintain a high quality level of continuing support services or it may make mistakes or policy decisions that hurt the franchisee.

What is the relevant legislation concerning franchising?

There is no specific legislation governing franchising operations in Hong Kong. There are no exchange controls, anti-trust laws, or foreign equity participation or local management participation regulations. Disputes arising from the franchise agreement will be subject to the common law (and specifically the principles of contract law) and to the legislation relating to the registration, licensing and protection of intellectual property rights. Such legislation includes the Trade Marks Ordinance (Cap. 43), Trade Descriptions Ordinance (Cap. 362), Copyright Ordinance (1997), Registered Designs Ordinance (1997), and Patents Ordinance (1997).