WASH1\4874419.3DecreeoftheStateCouncilofthePeople'sRepublicofChinaNo.485RegulationsonAdministrationofCommercialFranchisehasbeenpassedbythe167thregularmeetingoftheStateCouncilheldonJanuary31,2007,andisherebypromulgated,whichshallcomeintoeffectasofMay1,2007.PremierWenJiabaoFebruary6,2007RegulationsonAdministrationofCommercialFranchiseChapterIGeneralProvisionsArticle1.TheseRegulationsareformulatedwiththeaimstoregulatecommercialfranchisingactivities,topromotethehealthyandorderlydevelopmentofcommercialfranchise,andtosafeguardmarketorder.Article2.ThosewhoengageincommercialfranchisingactivitieswithintheterritoryofthePeople'sRepublicofChinashallcomplywiththeseRegulations.Article3Commercialfranchise(hereinafterreferredtoas“franchise”)referredtointheseRegulationsmeansthebusinessactivitieswherebythefranchisor(hereinafterreferredtoas"franchisor"),throughexecutingcontracts,allowsthefranchisee(hereinafterreferredtoas"franchisee")theuseoftheoperationalresourcessuchasregisteredtrademark,enterpriselogo,patent,know-how,etc.thatthefranchisorowns,andthefranchiseeundertakesbusinessundertheunifiedbusinessformatinaccordancewiththeprovisionsofsuchcontracts,andpaysfranchisefeestothefranchisor.Neitherentitiesotherthanenterprisesnorindividualsmayengageinfranchisingactivitiesasfranchisors.Article4Franchisingactivitiesshallbeconductedincompliancewiththeprinciplesoffreewill,fairdealing,honestyandgoodfaith.Article5ThecompetentcommercialauthorityoftheStateCouncilisinchargeofthesupervisionandadministrationofnationwidefranchisingactivitiesinaccordancewiththeseRegulations.Thecompetentcommercialauthorityofthepeople'sgovernmentofeachprovince,autonomousregionandmunicipalitydirectlyundertheCentralGovernment,andthecompetentcommercialauthorityofthepeople'sgovernmentofeachcitywithdistrictsareinchargeofsupervisionandadministrationoffranchisingactivitieswithintheirrespectiveadministrativedivisionsinaccordancewiththeseRegulations.Article6Anyentityorindivi