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Dealing with Sales Disputes in China when Franchising

By EU SME Centre | Case Studies      28.05.2018     Tags:

This case study, provided by ECOVIS Beijing, describes a case of its foreign company client, which was involved in a sales dispute in China with a franchise agreement. 

Case description

Company A is a retail company specialized in furniture. In 2014, it entered into a two-year franchise agreement with Company B, an international furniture manufacturer. Company A paid a deposit of 40,000 RMB to Company B as an insurance against a breach of contract. Furthermore, Company A rented two shops in a shopping mall and decorated them according to the requirements of Company B. For this, it paid 700,000 RMB in total. However, due to quality issues with the furniture provided by Company B, Company A’s business ran into difficulties and had to shut down in early 2017. The issues included, among others, the use of a laminate layer in furniture, which was advertised as made of 100% wood.

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This case study was carried out in partnership with ECOVIS Beijing and the Benelux Chamber of Commerce (BenCham).

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