Guoquan Sells Durian in Cross-Sector Expansion: Shenzhen Lawyer Analyzes Franchisee Contract Risks and Compliance Points
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Recently, Guoquan Food released its interim results for 2026, showing that it is transforming from a hotpot ingredients specialty store into a "community central kitchen," with new categories such as durian, beverages, and ice cream appearing on its shelves in an attempt to capture consumers' "next meal." In the first half of the year, Guoquan generated revenue of RMB 3.947 billion, a year-on-year increase of 21.8%, with a total of 12,198 stores, of which franchise stores accounted for over 99%. Although the expansion of this business model has brought growth, it also harbors hidden legal risks. As a Shenzhen lawyer, this article will analyze the legal issues behind Guoquan's expansion from the perspectives of franchise contracts, food safety, consumer rights, and corporate compliance, providing practical advice for franchisees and consumers.
Contract Risks in the Franchise Model and Protection of Franchisee Rights and Interests
The rapid expansion of Guoquan relies heavily on its franchise model, with 12,190 of its store network being franchised outlets. While this model enables fast market penetration, the contractual relationships between franchisees and the brand often harbor hidden risks. Franchise contracts typically involve clauses such as franchise fees, supply obligations, territorial protection, and non-compete restrictions, which can easily give rise to disputes if the terms are ambiguous or clearly inequitable.
According to Article 12 of the Commercial Franchise Management Regulations, the franchisor shall provide true, accurate, and complete information to the franchisee in writing at least 30 days prior to the execution of the contract. This includes the franchisor's business conditions, the number of directly operated stores, contract performance status, and other relevant information. Before signing the contract, franchisees must verify whether Guoquan has lawfully fulfilled its information disclosure obligations; otherwise, it may constitute fraud.
Additionally, new product categories introduced by Guoquan, such as durian and beverages, may require franchisees to purchase specific equipment or increase inventory, which involves the supply obligations and modification clauses in the contract. If the brand unilaterally adjusts the supply catalog or prices, franchisees should rely on Article 533 of the Civil Code concerning change of circumstances to claim adjustment or termination of the contract. When handling such disputes, courts in the Shenzhen area typically emphasize the genuine expression of intent of both parties and the principle of fairness. Franchisees should retain the contract, communication records, and payment vouchers to safeguard their rights.
Lawyers advise that franchisees should engage professional attorneys to review the contract before signing, with particular attention to clauses concerning franchise fee refund conditions, territorial protection for business operations, and supply price adjustment mechanisms. Additionally, franchisees may verify Guoquan's filing information with the Ministry of Commerce to confirm whether its franchise qualifications are lawful and valid.
Food Safety Compliance: Legal Obligations Arising from New Product Categories
Guoquan has added foods such as durian, cakes, and ice cream, which are either pre-packaged or bulk foods and must strictly comply with the provisions of the Food Safety Law. According to Article 53 of this Law, food business operators shall, when purchasing food, examine the supplier's license and the food's出厂 inspection certificate or other qualification certification documents, and establish a purchase inspection and record system. As the brand owner, Guoquan has an obligation to ensure that the food in its supply chain meets safety standards, and franchisees must also fulfill their duty to inspect purchased goods; otherwise, they may face administrative penalties.
In the first half of 2026, Guoquan's gross margin declined, partly attributable to the lower gross margins of non-traditional categories such as durian. However, low gross margins cannot serve as an excuse for lowering safety standards. If consumer complaints arise due to food safety issues, under Article 148 of the Food Safety Law, consumers may claim compensation of ten times the price or three times the damages incurred. In recent years, Shenzhen market regulatory authorities have conducted frequent inspections of food retail enterprises. Both Guoquan and its franchisees are required to establish comprehensive food safety management systems.
In practice, franchisees often bear liability for food quality issues arising from products uniformly supplied by the brand owner. Under Article 130 of the Food Safety Law, the organizers of centralized trading markets, lessors of stalls, and holders of exhibition or sales events who fail to fulfill their inspection obligations shall bear joint and several liability. A franchised store, acting as a seller, must make compensation first if it cannot prove that the food's source is lawful. Therefore, franchisees should retain all purchase invoices and inspection reports, and regularly self-check food expiration dates and storage conditions.
Lawyers advise that the Guoquan brand owner should provide food safety training to franchisees and establish a traceability system. Franchisees, in turn, should clearly define quality liability allocation clauses in their contracts with the brand owner to avoid bearing undue liability arising from product defects.
Consumer Rights Protection: Legal Boundaries of Advertising and Product Quality
Through online channels such as Douyin, Guoquan achieved a GMV of 240 million yuan for "Guoquan Farm," representing a year-on-year increase of over 600%. Although live-streaming sales can boost sales, they also involve legal risks related to advertising and promotion. According to Article 4 of the Advertising Law, advertisements shall not contain false or misleading content, nor shall they deceive or mislead consumers. If Guoquan exaggerates the effects or uses absolute terms when promoting products such as durian and beverages, it may violate Article 9 of the Advertising Law and face fines.
For example, if Guoquan claims that its durian is "directly sourced from the place of origin and absolutely fresh," but the actual product does not match the advertisement, consumers may, in accordance with Article 55 of the Consumer Rights Protection Law, demand a refund and triple compensation. In recent years, the Shenzhen Consumer Rights Protection Committee has handled multiple disputes involving livestream e-commerce sales, emphasizing that streamers and merchants must bear responsibility for the authenticity of product information.
Additionally, Guoquan's membership system has 82 million registered users, involving the protection of personal information. According to Article 13 of the Personal Information Protection Law, consent must be obtained when collecting personal information, and the principle of minimal necessity must be followed. When Guoquan collects consumer data during membership registration and transactions, it must ensure information security; otherwise, it may face administrative penalties.
Lawyers advise that consumers purchasing Guoquan products should retain evidence such as livestream recordings and order screenshots. If they encounter false advertising, they may file complaints with the Shenzhen Market Supervision Administration. On the corporate side, Guoquan should review all promotional materials to avoid legal risks.
Compliance Strategies and Legal Implications of Corporate Cross-Industry Expansion
Guoquan has expanded from hotpot ingredients to full-category retail, involving legal regulations across multiple industries. According to the Company Law and the Provisions on the Administration of Registration of Business Scope of Enterprises, an enterprise that changes its business scope is required to undergo industrial and commercial change registration. If Guoquan adds freshly prepared foods such as stir-fried dishes and breakfast items, it may involve a change to its food operation license and must apply to the market regulatory authority. Operating without obtaining the license, in accordance with Article 122 of the Food Safety Law, will result in confiscation of illegal gains and fines.
In addition, Guoquan's rapid store expansion requires that its legal relationship with franchisees comply with the Antimonopoly Law and the Anti-Unfair Competition Law. If Guoquan abuses its dominant market position to force franchisees to purchase high-priced equipment or fix prices, it may constitute unfair competition. As a frontier of reform and opening up, Shenzhen adopts a tolerant attitude toward commercial innovation, but it also enforces the law strictly, and enterprises need to pay attention to compliance review.
From a lawyer's perspective, the success of Guo Quan's transformation depends not only on market strategy but also on legal risk prevention. Franchisees, consumers, and the enterprise itself should all operate within the legal framework. Guangdong Zhiming Law Firm has long served local enterprises in Shenzhen and specializes in franchising, food safety, and consumer rights disputes. If you are facing similar legal issues, please contact our firm for professional support.
Conclusion
"Pot loops sell durian, which seems to be a business innovation, but in fact involves a series of legal issues. From franchise contracts to food safety, from advertising compliance to personal information protection, every aspect needs to be escorted by law. For franchisees, it is important to be cautious before signing contracts; for consumers, keep credentials when shopping; for enterprises, the string of compliance should be tightened at all times during expansion. Although the law does not hinder innovation, only by abiding by the law can we go steadily and far."
