Franchising in China
FRANCHISING
China Foto Press
s of the Foreign franch ises are reaching more Chinese consumers over larger segment
. country
The Pros and Cons of Franchising in China
US companies must jump hurdles to operate successful franchises in China, but the potential benefits are too great to ignore.
William Edwards
40 July–September 2011 chinabusinessreview.com
FRANCHISING
W
estern and local franchise brands have developed group is largely a young, upwardly mobile, and aspirational significantly in China over the past 15 years, as the two-income family demographic with one child and Chinese consumer has become an engine of considerable discretionary income. economic growth and the country’s business environment has Food service improved. In the early 1990s, the word As with franchise development in other “franchise” had still not been directly Quick Glance emerging markets, food franchises first translated into Chinese; the closest came to China from the United States. translation was “chain of stores.” In I China’s economic boom has The Yum Brands, Inc. chains KFC Corp. addition, the PRC government did not enabled more Chinese consumers and Pizza Hut, Inc. entered China in formally regulate franchising. To help to frequent franchises and more 1987 and 1990, respectively, and have develop the industry, the PRC government Chinese investors to buy been in the country for more than 20 in 1997 issued the Interim Measures on franchise licenses. years. McDonald’s Corp. also entered the Regulating Commercial Franchise I Because many foreign brands country in 1990. None of these brands Operations. The China Chain Store and are viewed in a positive light in initially franchised their outlets in China, China, foreign franchises may Franchise Association (CCFA)—a quasihowever; they were company-owned and perform well—if they cater to the government nonprofit membership operated, in some cases with a joint tastes of local consumers. association for Chinese
China Foto Press
s of the Foreign franch ises are reaching more Chinese consumers over larger segment
. country
The Pros and Cons of Franchising in China
US companies must jump hurdles to operate successful franchises in China, but the potential benefits are too great to ignore.
William Edwards
40 July–September 2011 chinabusinessreview.com
FRANCHISING
W
estern and local franchise brands have developed group is largely a young, upwardly mobile, and aspirational significantly in China over the past 15 years, as the two-income family demographic with one child and Chinese consumer has become an engine of considerable discretionary income. economic growth and the country’s business environment has Food service improved. In the early 1990s, the word As with franchise development in other “franchise” had still not been directly Quick Glance emerging markets, food franchises first translated into Chinese; the closest came to China from the United States. translation was “chain of stores.” In I China’s economic boom has The Yum Brands, Inc. chains KFC Corp. addition, the PRC government did not enabled more Chinese consumers and Pizza Hut, Inc. entered China in formally regulate franchising. To help to frequent franchises and more 1987 and 1990, respectively, and have develop the industry, the PRC government Chinese investors to buy been in the country for more than 20 in 1997 issued the Interim Measures on franchise licenses. years. McDonald’s Corp. also entered the Regulating Commercial Franchise I Because many foreign brands country in 1990. None of these brands Operations. The China Chain Store and are viewed in a positive light in initially franchised their outlets in China, China, foreign franchises may Franchise Association (CCFA)—a quasihowever; they were company-owned and perform well—if they cater to the government nonprofit membership operated, in some cases with a joint tastes of local consumers. association for Chinese