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China is Hot on Franchising

by Mario Herman

There is an effort underway in China by a Government agency that is encouraging franchise growth. Read this article to learn how China is encouraging franchise growth.

According to China’s Ministry of Commerce (MOC), at the end of 2010 there were more than 4,500 registered franchises in China.  Recognizing the importance franchising plays in the economy, the MOC has issued a guideline vowing to increase the number of franchised outlets, expand the scale of such operations and standardize the franchise market within the next five years.  According to the guideline, the MOC will revise the regulations relevant to the franchising industry and thereby standardize the market.  

In addition to standardizing the industry through regulation, the guideline also reported that over the next five years relevant authorities would work to help build brands and bring brand-building efforts into line with local governments’ trade development plans, including assisting companies in developing their information systems and accelerating the establishment of local logistic systems.   The guideline also reported that the authorities would establish and evaluation system for brands, and would strive to improve the collection of industrial statistics and credit rating. 

Franchising is nothing new in China, and is an important part of its economy.  For example, in 2010, the China division of Yum! Brands, Inc. opened more than 500 new restaurants in mainland China.  Yum! Brands franchises under the KFC, Pizza Hut and Taco Bell brands.  KFC is the leading quick-service restaurant brand in mainland China, with over 3,400 restaurants in more than 700 cities. Pizza Hut is the leading casual dining brand in mainland China with over 550 Pizza Hut Casual Dining restaurants in over 130 cities.

With the standardized regulation and anticipated assistance from the relevant authorities in brand-building, etc., it will be important for any franchise company wishing to enter the global market to consider China as a strong and developing market. 

Mr. Herman based in Washington, D.C., represents franchisees domestically and internationally negotiation, mediation, arbitration, and litigation.

mherman@franchise-law.com
www.franchise-law.com
www.internationalfranchiselaw.com
202-686-2886 (ph)

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