Expansion offshore for a Franchisor is a major investment in time and capital which should result in well informed analysis of expected future costs and benefits. Sensible decisions based on such analysis are central to securing the future profitability of the venture.
If an international franchisor wishes to expand to China we advise that their best course of action is not simply limited to sourcing a Master Franchisee. We would recommend that a series of proper study & preparation work be undertaken initially and further ongoing the whole process of franchising in China.
To make your franchising journey into China as simple as possible, FranChina offers a complete range of legal and consulting services, such as business structuring, intellectual property registration, franchise agreements and disclosure requirements, translation & localization of documentation, territory and location analysis, retail project management, organization of specific market research activities and ongoing system supervision and management. Particularly, FranChina is well placed to assist in the recruitment of Master Franchisees for international franchisors entering the China market through its co-arranging Matchmaking Workshop with China Chainstore & Franchise Association (CCFA), with the emphasis on a long term relationship that could include a monitoring and guidance role for those Masters when they commence their operations.
The Services
For an international franchisor wishing to expand into China, FranChina is prepared to provide following legal & consulting services based on different demands:
The Chinese market has become increasingly important to the world business activities. As time passes, businesses that do not take advantage of China's opportunities quickly will have increasing difficulty in penetrating that lucrative market in the future.
China's booming economy of 1.3 Billion consumers has spawned a rapidly-growing middle-class with ample disposable income and a pent-up desire for faster, trendier, more convenient and more Western lifestyles. This growth trend is evidenced by annual retail sales growth of an average of 10%, with retail food and clothing sales growing at even higher rates.
China is now the second-largest franchising market in the world after the USA and the most promising destination for international franchise systems seeking new market opportunities. Until recently, foreign franchisors entering China were traditionally limited to establishing Joint Ventures with local firms but since June 2004 foreign entities can now establish fully-owned companies in the commercial and retailing areas. With no more than ten years' franchising history and a recent drop in restrictions due to its entry into the WTO, China now has more than 2,000 foreign and domestic franchises and 70,000 franchisees including McDonald's (700 outlets), Kentucky Fried Chicken (1,500 outlets), Pizza Hut (110 outlets), Starbucks (120 outlets) as well as Dairy Queen, Days Inn, Sign-A-Rama and many others.
Successful franchisors concentrate their efforts where China's massive buying power is located – in 100+ urban centers, each with a population of over one million consumers, all hungry for international concepts and products.
China is the most promising destination for overseas franchise systems in the Far East. In global terms second only to the US as an overall franchising market, China cannot be considered as a single market. Language, local market development and consumer tastes vary considerably among the 1.3 Billion consumers stretched out over thousands of kilometers of territory. Because of these regional differences which depend on local tastes and changing trends, the economy of a region and local competition can only be successfully handled through the assistance and know-how that a local expert such as FranChina can provide.
Because of the market's rapid growth, local Chinese entrepreneurs are quickly learning about the potential that franchising offers. With the increase of local competition it is vital for international franchisors to utilize the networking and know-how of experts in the field in order to take advantage of market opportunities quickly and position themselves correctly now and fully benefit in the long term.
The most recommended method of franchising in China for an internationally-based Franchisor is with a Master Franchise approach and, due to the size of the Chinese market, more than one Master/ Franchisee per System will often be required to cover the various regions.
Establishing local ties and building relationships are even more vital in the Chinese market than in many others. Relying on the guidance and expertise of a well-established group such as FranChina will certainly enhance an international franchisor's efforts to penetrate this quickly-growing market. In today's China, sound local advice and reliable local support are vital to foreign franchisors, and invariably make the difference between mediocre profits and lucrative long-term success.
The Program
Now, we are happy to announce that FranChina and the official franchise organization in China, CCFA (China Chainstore & Franchise Association) are jointly working out a program 'Matchmaking Workshop' to facilitate the process of international franchisors' seeking prospective master/area franchises.
This program is especially designed to promote and assist international franchises to penetrate the lucrative Chinese market by attending the Matchmaking Workshop to show their brands and further to screen and evaluate the right potential local partner for the international franchisor.
Many international companies have considered China as a potential market but have been slow to take advantage of the opportunity that market represents because of concerns about what are perceived as obstacles:
the challenges of doing business in a different language
the huge size of the market area
the overwhelming numbers of consumers to approach
the territorial differences within the market
the level of expertise needed to handle their product or service in that market.
Above all, foreign franchisors feel hampered by their lack of knowledge of this massive and attractive market opportunity and wonder how to approach it professionally.
CCFA & FranChina resolve every one of these concerns through the Matchmaking Workshop program. A series of workshops are planned across China on a regular basis throughout the year. At these events franchisors coming around the world will have full opportunities to present their systems and fully describe to potential Masters, Franchisees and Investors. Each workshop will be attended by more than 100 pre-screened investors who will then be registered in CCFA & FranChina's database. FranChina will be also providing service to those franchisors unavailable to present themselves by ACTING ON BEHALF OF them and discuss and negotiate to a point where only the BEST potential partner who meets every one of the company's prerequisites will be referred.
The Matchmaking Workshop program will visit the main cities in China, and in particular those where the greatest interest in the international franchises has been shown. The cities visited will also be chosen on the basis of the greatest potential offered to establish a foreign franchise system.
For more information about the latest Matchmaking Workshop or any content above, please contact James Liu at james.liu@franchina.cn.
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