When you are establishing a presence in China, you do have several options. If you’re not interested in starting up a representative office and you’re not going to create a manufacturing facility which would make a WOFE the best choice, you might want to consider franchising.

The Growth of the Franchise in China

Although in many parts of the world, franchises are commonplace, they have only really begun popping up in China in the last decade or so. Despite their relative newness to the economy, they have become some of the most successful operations in that short of amount of time.

More than 80 different industries are currently being represented as franchises in China. These industries include the expected catering and retail establishments, as well as the less common automotive, education, and family-related franchises. More than 2,000 different franchise stores are in operation in the country now and more are expected in the upcoming years.

Establishing a presence in China through franchising can sometimes be difficult for foreign companies because there are only a limited number of people in the country with the financial ability and experience necessary to operate a successful franchise. Many of the franchises that have done well in the country are in the food and beverage sector which represents two-fifths of all the franchises operating in the country. However, that leaves plenty of opportunities available in the other sectors.

Issues to Keep in Mind

According to the Ministry of Commerce, foreign companies can begin establishing franchises in China as long as they have two stores operating in any other part of the world. However, if you are looking into franchising, you must remember that different cultures do require accommodation. For example, McDonald's originally failed in some of their franchise markets because they did not acknowledge the vegetarianism common among the cultures of the other countries. Only when they adapted their product to meet the needs of the new market were they able to find success in places such as India.

The same lessons apply to any franchise operating in a different culture. Understanding the market and being able to adjust the product or service to fit the needs of that market is critical to your ability to succeed. Additionally, franchising fees and product prices must be kept to a minimum so that the franchise can grow quickly and spread throughout the market rapidly.

Good Advice Regardless of Method

No matter how you are establishing a presence in China, you need to have partners in the field who will help you understand how business works in the country. Without these local connections, many foreign businesses become lost in such an unfamiliar business environment. Having these relationships can give you an advantage as well because they can help you establish your reputation within the country – an important step to future success in the market.

Franchising is a wise idea for companies that are already well-established in other parts of the world and believe their product would be well-received by Chinese consumers.