Following Wilkerson's recent 2004 franchise initiative trip to China, Franchise Recruiters Ltd. has undertaken a strategic course to expand a brokers, and franchise business information network in the People's Republic of China (PRC). His plan is to involve potential Chinese franchisee prospects with the established global franchise business community. Plans include providing sources for funding and financing, and to encourage improved understanding of the challenges facing foreign franchisors in Mainland China, to Hong Kong. This mission is in the composition and production stage. Your involvement is welcomed.
The domain name: www.franchisinginchina.com is owned by Franchise Recruiters Ltd., the Worlds leading source for franchise experienced executive management professionals. This corporation has operated for two decades as an executive search consulting organization dedicated exclusively to the promotion and progress of the global franchise community. Wilkerson is a former President of the International Franchise Association in Washington, D.C., U.S.A.
In addition, the U.S. Department of Commerce, Office of China Economic Area, maintains a strategic business web site at: www.mac.doc.gov/china/PRNEW.html. This site provides updated guidance on China's legal developments and administrative apparatus for registering and enforcing foreign intellectual property rights under current laws, along with hundreds of nexus links, including the business of franchising in the People's Republic of China (PRC).
Additional economic and marketing data relating to franchising in China
The gross domestic product in China is $1 trillion (U.S.)
The ability to own a home is now in reach of hundreds of millions of Chinese. Home sales are strong in the PRC. Appliance and electronic sales are robust.
4% or 50 million Chinese have household incomes of more than $20K (U.S.)
General services are in demand from this group, along with health care, education, travel, and food. However, sophisticated consumers are lacking and some markets are exceedingly competitive.
The Primary cities for franchise development are Beijing, Guangzhou, and Shanghai. The costal region of China represents 58% of the economy and only 38% of the population.
Consumption of consumer goods is huge within the rural, and far interior of the country, although, nearly impossible to reach.
40 to 50 key cities, along the coast region, will provide a franchisor with as much market as can be serviced in China, given the economics of the other two regions, transportation, distribution challenges, and sheer cost of doing business.
Understanding local customs and cultures is paramount.
Government intervention in business is on the wane. One-quarter of China's industrial output today is generated by state-owned enterprises. The majority of the China economy is now in private hands.
The stock market in China is the second largest in Asia, following Japan.
The country is attracting more than $50 billion per year in foreign investment, second to the U.S.
In 2004 more Chinese built Buicks will be sold in the PRC than will be built by U.S. manufactures and sold in America.
The auto market is enormous in China and growing at such a pace that bicyclists have little room to negotiate on clogged city streets and roads.
In China profits are usually reinvested to maintain market positions. Franchisors will need to constantly invest in their systems in China, as markets evolve quickly.
Brisk market growth will necessitate international franchise brands to secure their initial positions quickly to build their system, brand awareness, and workforce management teams. Training is a lifelong vocation.
Well established relationships, are the key to doing business in the PRC.
Chinese investors are looking for franchise brands that have a great deal of experience in doing business globally, with definable track records, tangible assets, tested business models, ease of training the masses, and a record of success.
The 50-50 joint ventures are becoming a thing of the past in China. Franchisors realize that Chinese partners cannot add the anticipated business value as much as they once did when taking the product or service to market. However, franchisors must be very careful with legal protections established prior to granting a franchise. Remember, the Chinese are still the sovereign pirates of Asia.
Coke, understanding market, and cultural requirements, has introduced different flavors and products to capture individual consumer taste nationwide.
Yum Brand and their many franchised systems will continue to grow in China. KFC plans to expand in 2005 by 200 units in addition to their 1200 in already in the country. McDonald's will expand from 600 units with an additional 100 new stores. The total income of fast food restaurants in China now stands at over $180 billion yaun, RMB. KFC and McDonald's account for 8%.
The 2008 Olympics will require a tremendous amount of infrastructure development in Beijing and the surrounding markets. Franchise corporations can train, and establish these types of business models quickly, efficiently, and successfully. The time to get involved in this project is now.
There is a reality factor to take into careful consideration when planning to franchise in China. Local managers are difficult to find. The pool for trained or skilled managers is shallow. Training operators is a challenging responsibility for franchisors in the PRC. Training is an industry within itself in China.
Functioning through all this, a franchisor first to China with the most could be the take all winner within a particular industry or service sector.
Foot Note: For additional government and franchise business information read Jerry Wilkerson's magazine article: "China; The mother of all markets," published in the London based Franchise International Magazine. The full text of the article is published on this web site.
All facts and data contained in this brief are for reference purposes only, and subject to change.
