Franchising - The road to China GB

With about 200,000 franchised stores over 2600 brands, China is currently the largest franchise market in the world. early success of domestic and foreign brands such as Nike Led and RSS, and the industry is growing at an impressive rate of 35 percent to 40 percent during the last year. Especially in the mid-90s, late, many companies in all areas including R & B, fashion, fitness and education are the sellers of real estate franchise chain floors, all decorated in all of China.
engine of growth
In a study conducted by The JLJ Group noted that the rapid expansion of franchise systems for the growing middle class in China, the growing acceptance of the concept of franchising as the contractors can also be attributed to a general improvement of the regulatory framework in China .
Many brands have been attracted to China, increasing disposable income and its conduct exploratory growing middle class. This is one of the key factors that motivate Metro, Papa John's to expand rapidly in China. Their goal was a slice of the market with other market participants, as is well known KFC, the fight / McDonald's and Pizza Hut - and the franchise seemed like a good solution. With the financial resources of the franchisee, Metro just filled the East China and Sichuan, with more than sixty retail stores, while more than fifty Papa John's / Restaurants satisfies the desire of these pizzas in eastern China.
While the demand is stimulated by the growing middle class, the entrepreneurial spirit of individuals and Chinese companies have helped sustain a steady supply of capital which could be national and international franchisors in tap water. KFC draws 100 applications each month, each prepared with a capital of RMB 8 million required to open a KFC Release.

progressive development and improvement of the regulatory environment in China has played an important role in the development of the franchise. China has adopted its first franchise law in 1997. However, the laws do not specify that the lack of provisions for foreign companies and many franchisors operate in gray areas first. After entry into the WTO (World Trade Organization) members new regulations were published in 2005 and 2007, and offers much more flexibility and opportunity for foreign brands, particularly in the field of International Franchising.
Sign The idea of using a deep pool of capital, the franchisees to market faster, run by entrepreneurs themselves, as well as business executives motivated definitely won numerous brands. In early 2007, 69% of companies with existing stores in China, the franchise model to expand the business have adopted.
However, there are others who are hesitant. KFC and McDonald's - both of which adopted the franchise model outside of China - have few franchised stores in China. And Pizza Hut is not. Why are these major players to jump into the water so much care franchise?
looking for reliable partners
Although there is no shortage of Chinese entrepreneurs are willing to invest in a franchise, few have the power to manage well. Many local affiliates do not have a good understanding of the concept of franchising, and no access to modern management practices. For example, a popular Inner Mongolia Xiao Fei Yang stew chain closed its stores in the franchise, which do not meet quality standards. Wide Tera, is an international player with nearly 70 fitness gyms in China also recovered many of its franchise gyms. Both marks, carefully observed during the years that have been damaged by poor product knowledge of franchising, equipment purchase, or substandard ingredients and service quality.
The long-term orientation and training is therefore a key objective for many franchisors. Burger King - to implement major projects as 1,000 stores by 2015, required the subject - the franchisee is six months training, while KFC has a twenty weeks of training to bring their dealers on their toes.
There are many challenges that many retail chains through direct participation or sellers want to expand joint venture (JV) with local partners in China. Just as the booming market offers potential for increasing revenue through the direct participation of enterprises. Among those who have the right to vote, voted 60% in the franchise agreements with companies known for creating various regions. These organizations are better equipped with management experience and are less inclined to sacrifice quality for the brand image in the short-term profits. Most Papa John's Shanghai negotiates from a race of master franchising Shanghai RCS Group Co., Ltd. and affiliates controlled SCR.
adapt to local tastes form
international franchisors should also carefully consider the main differences between China and other countries. In China too, tastes and needs of regional practice vary widely. While the food is very spicy Sichuan, south-east foods tend to be boring. Although consistency is an important aspect of the concept of franchising, the changes in innovative products to meet local needs has a significant impact on the success of franchising. KFC local services such as hamburgers, chicken and boiled rice seasoned chicken mushrooms are major attractions for Chinese consumers. Pilot operated a Burger King restaurant in a hidden place to analyze the local flavor before the officer and now has a loyal following among teenagers in the region, executives and expatriates.
taste preference aside, China is very fragmented in terms of purchasing power. The average income in cities such as Chongqing, Qingdao, Xi'an are significantly lower than in Beijing; / and Shanghai. This means that the franchise is that donors actually able to introduce products in small quantities at a reduced price or strategies. For example, McDonald's and KFC are very positive, with ice cream to 1 yuan to attract the masses in their restaurants. Last but not least, the purchase of priority between the different regions of China. Using Nanjing, for example, one can imagine that their disposable income higher than cities such as Qingdao, Chongqing and Xi'an, Nanjing, the population should correlate with higher room charges. In fact, people spend less Nanjing Dining Out, compared to three other cities, but prefer to devote to training.
prevent imitators
Another important challenge that slows down the start of the franchise, or any other foreign companies listing in China is the widespread violation of intellectual property (IP). Although laws are in place, enforcement remains weak. The responsibility often falls on the traces of wounds on the owner of intellectual property. Quan Ju De is pleased to approve that imitate prey exploiting their logos to attract customers. Xiao Fei Yang imitators too many witnesses, with its own brand - including some former members, because it is sufficiently fired. Although registration marks can not guarantee the franchisor not to use the intellectual property theft, this can have disastrous consequences. As China marks the grants on a register in the first place, there are cases of people registered in bad faith on the brand and then demand payment for the use thereof. E 'therefore imperative for companies of all brands, the names of the register of commerce (English and Chinese), domain names and patents before entering the market.
operating in China are the new franchise regulations adopted in 2007 effectively removed many restrictions and gray areas. For the first time, foreign brands are not required to provide at least two stores in China before starting the franchise. Currently, there are actually two successful companies around the world need in the world. Despite the policy of welcoming international franchising, franchisor still much prefer the legal presence in China to establish control and authority over its franchisees to receive.
selection of cities for the expansion franchise is as important as the design of a model of efficient organization. With a Tier-1 cities still expensive and saturated, many franchisors growth opportunities in Tier 2 cities. Ten cities, including key priorities, such as Shenzhen, Tianjin, Nanjing, Qingdao, Nanjing, Shenzhen, Xi'an, Chongqing, JLJ and were analyzed in the study. In some of these cities, people already with the foreign brands, but not spoiled for choice. These cities offer great opportunities for new affiliates.
franchising in China currently accounts for only 3% of total retail sales to 40% in the United States. No doubt the comparison, there is room for growth. However, some obstacles are, as the difficulty in finding a reliable and franchisee prompted the desire to increase profits by rapidly growing market yield some foreign brands directly managed stores, franchises and instead embrace partnership. In any case, much time, effort and resources are needed to obtain the franchise network. Foreign companies must obtain a thorough market research and professional advice as necessary to facilitate the planning of a successful strategy of expansion in China.