Franchising in China

A report on the current situation of franchising in China.

Since this article was published in Hot Branding News last September, not much has changed in Chinese franchise law. The most recent franchise law, effective since February 2005, is still very ambiguous. For example, the law states that a company needs to have two stores in operation in China for one year before franchising, unless the company works a gray area by creating a master franchise agreement with a Hong Kong or Taiwan. Or, another example, though the law itself does not say whether a foreign company can directly franchise into China, since late April, it has been said that it is possible if a foreign franchiser meets certain obligations.

The real franchise news in recent months involves changes in strategy and the entry of new players. Sacks Inc. will become one of the first American department stores to franchise in China. The new luxury store will be built in the famous Bund district of Shanghai. Sacks Inc. has signed with Roosevelt China Investments Corp., allowing RCIC to own and operate the franchise in China. Sacks is hoping to answer a booming Chinese demand for luxury products°™a market that is purportedly growing at 60% a year.

KFC, operated by Yum! Brand Inc., which already has over 1,700 outlets in China, has changed its franchise requirements in order to get a foot in the door of second and third-tier Chinese cities. The initial fee of 8 million Yuan for franchisees has been lowered to at least 2 million Yuan for these less developed cities. KFC is adapting to the lower amounts of capital in cities away from the special economic zones in an effort to meet the needs of interested investors in those areas.

2 Comment

  • 1.  |  April 30, 2006, 4:27 pm

    Just a quick note. I read the "controversy" about copyrighted designs etc on the chinalaw blog. The new design has a bit of flaw in Firefox. It doesn't render as it should. The lay out is broken. Thought you should know.

  • 2.admin  |  May 1, 2006, 5:27 pm, Thank you for your reminder, we will develop it soon.

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