Fictitious Operating Data in Franchise Recruitment Constitutes Fraud; Franchisees Entitled to Rescind Contract

WISECODE Take

Many believe exaggerated store revenue in franchise promotions is merely marketing fluff, but the court has explicitly ruled it as legal fraud. The Sichuan Higher People's Court ruled in Case No. (2020) Chuan Zhi Min Zhong 405 that a franchisor claiming 'daily sales over 30,000 RMB' without supporting financial statements constituted intentional dissemination of false information. This ruling allowed franchisees to rescind their service contract and recover their 86,800 RMB service fee along with damages. This means brands relying on fabricated operating metrics face contract revocations and refund claims, while legitimate franchisors presenting verified figures remain completely unaffected. Zhidian provides intellectual property licensing and franchise compliance review services to help enterprises establish lawful disclosure mechanisms. For franchise operations, I offer two recommendations: First, all revenue figures in recruitment materials must be backed by verifiable financial statements and receipts; Second, prospective franchisees must request verifiable data before signing rather than relying solely on promotional videos. Franchise competition ultimately comes down to product quality and ongoing operational support, where verified data serves as the strongest line of defense.