Japan
Answer ... The Japan Franchise Association defines a ‘franchise’ as follows:
A Franchise is a continuing relationship between one business concern (called a Franchisor) and another business concern (called a Franchisee) where a Franchisor and a Franchisee enter into a contractual agreement, the Franchisor granting the Franchisee the right to use the signs representing the Franchisor’s business, which signs include the Franchisor’s logo, service mark, trade name and others, as well as the Franchisor’s management know-how, and to conduct the product sales and other businesses which bear the same image as the Franchisor’s; the Franchisee paying the consideration to the Franchisor in return, providing the fund required for the business, and operating the business under the Franchisor’s guidance and assistance.
Apparently, this definition refers only to business format franchising. The definition is most often cited in court decisions dealing with franchise disputes.
The subject of the disclosure duty under the Medium-Small Retail Promotion Act (MSRPA) (see question 1.1) is a person that presides over a ‘qualified chain-store business’. Section 4(5) of the MSRPA defines a ‘chain-store business’ as “a business in which, according to a standard contract, goods are continually sold, directly or by a designated third party, and assistance over the operation is continually given, principally to medium or small sized retailers”. A ‘qualified chain-store business’ is a special type of chain-store business, defined by the act as “a chain-store business for which such a standard contract is employed as provides that a trademark, a trade name or any other sign is licensed to, and initial franchise fee, security deposit or any other fee is to be paid by, a member at the time of acquiring a membership”.
With respect to the Japan Fair Trade Commission (JFTC) Guidelines, Paragraph 1(1) defines ‘franchising’ as “a form of business in which the Franchisor gives the Franchisee the right to use a trademark or trade name, and controls, guides and assists the operation of the Franchisee in sales of goods or services in a uniform manner”. The guidelines recognise that a franchise agreement “generally” includes clauses in relation to the following and limits the scope of its application to such franchises:
- the licensing of the franchisor’s trademark or trade name to the franchisee;
- control or guidance of the franchisee to ensure a uniform image of the business towards third parties and to support the franchisee’s operations;
- the payment of fees with regard to the above; and
- the termination of a franchise agreement.
Japan
Answer ... When concluding a franchise agreement, a pre-contractual disclosure duty applies. The disclosure duty may be based on:
- the MSRPA;
- the Anti-monopoly Act (AMA) Guidelines;
- the JFA’s voluntary regulation (incorporating the requirements under both the MSRPA and AMA Guidelines); and
- the case law based on the good-faith principle in the Civil Code.
See also question 6.1 for details.
The registration of documents is not required.
There is no requirement to include mandatory terms under Japanese law. However, the franchisor is advised to pay attention to the AMA Guidelines, as they provide that certain contractual terms may constitute abuse of bargaining power, tying or restrictive conditions on trade, depending on the circumstances.
Although there is no statutory regulation of the termination of a franchise agreement, the Japanese courts have developed case law on ‘continuous contracts’, which emphasises the value of maintaining long-term contractual relationships and requires good cause or an unavoidable reason for a franchisor to terminate a franchise agreement before the end of the agreed term. Whether all doctrine applies to a refusal to renew an agreement on the expiry of a contractual term is disputed.
Japan
Answer ... No answer submitted for this question.
Japan
Answer ... No answer submitted for this question.
Japan
Answer ... The AMA Guidelines on franchising provides that if a franchisor supplies goods to the franchisee, its restriction of the retail prices charged by the franchisee constitutes retail price maintenance. This is a type of unfair trade practice and constitutes a breach of the AMA if made without justifiable grounds. In case of retail price maintenance, the JFTC may issue a cease-and-desist order. It may also impose a surcharge if the cease-and-desist order is the second issued to the franchisor for retail price maintenance within a 10-year period.