The document discusses the rapid growth of franchising in China, highlighting that it has the largest franchise systems globally with over 82,000 outlets and a 49% growth rate, particularly in the catering, retail, and individual services sectors. It outlines the evolution of franchising laws and models in China since the late 1980s and describes the prospects and challenges for brands like Yum! in adapting to local market conditions. Pros of franchising include lower entry costs and faster expansion, while cons involve cultural barriers and competition.

2. Presented By:- Sudhir Singh Rajput
Yatish Mittal
Vikrant Arora
Amit Yadav
Chandrashekhar Chaurasia
Rohit Srivastava

3. Concept
 Over the last two decades, the people’s republic of china has
had the fastest growing market and GDP growth rate.
 China is hailed as one of the most important consumer
market of 21st Century.
 Franchising is one of the booming sector in the Chinese
economy.

4. Franchise in China
• China has the largest franchise systems in the world.
• China currently has more than 82000 franchisee outlets, and
growing at the rate of 49%.
• Nearly 60 industries have applied for franchise operations in
china.
• Industries includes catering, retailing, individual services and
automotive care.
• Nearly half of the top 100 restaurant companies are utilizing
franchise business model.

5. Evolution
 Franchising first emerged in china in the late 1980’s.
 Franchising industry in china experienced a period of disordered
development in early days.
 In 1997, the Ministry of Internal Trade established the first
Chinese franchise law.
 In china foreign franchising was still a grey area before the new
rule was published.
 The new regulation on commercial franchise announced by the
Ministry of Commerce on December 30th, 2004.

6. Franchising Models in
China
 Joint Venture:- Joint Ventures
means joining up with foreign
companies to produce or market
the products or services. For example, Mc Donald’s.
 Wholly Foreign Owned Enterprises:- All capital is
provided by the foreign investors who has full
control over the operations of the enterprise. For
example,
Tricon Group, which owns KFC
and Pizza Hut.

7. Cont…
Master Franchising:- A master franchise is
a person or entity who provides
services to franchisees in a
specified territory, typically
a major market, geographical
region or even one or more countries. Master
franchising is a method that has been
employed by most franchise systems. For
example, Century 21 China Real Estate

8. Best Prospects of Franchising
Sector
 Catering Industry:- Catering industry is
remaining the most popular
investing item because the
operation is relatively simple
and the market is vast.
 Education and Training:- Investing in education
industry will become
one of the hot spots from now
on. China’s fast growning economy
creates a sound developing space
for foreign language training.

9. Cont…
 Real Estate Brokerage:- China’s economic
reforms have ended decades
in which homes and apartments
were provided by the
government.
 Network Technology:- Franchise in network
technology sector is still a brand new model.

10. WHY CHINA?
MARKET
POPULATION
OPPORTUNITY
FASTER
ECONOMIC
GROWING
REFORM
ECONOMY

11. WHY CHINA?
VENDOR
COST ADVANTAGE
DIVERSIFICATION
GEO-POLIICAL HUMAN RESOURCE
DIVERSIFICAION AVAILIBILITY

12. Yum Brands In China
Yum was the parent company of several restaurant
chains including KFC, Pizza Hut, and Taco Bell, which
improves them and expand in more area in China.
Sam Su is the Chairman and CEO of Yum! Brands
China Division and Vice-Chairman of Yum!
Yum was the largest restaurant company in the world
in terms of the number of units.

13. Strategies Of Yum Brands In
China
 Quick Serve
 Non-Stop Expansion
 Traditional Cuisine
 Focus in New Generation
 Maintain Control over its Chinese Restaurant.
 Encourage the Growth of its Unit in Second – Tier
Cities.

14. Pros & Cons Of Yum Brands
PROS
• Emerging Market
• Innovation
• Deal-Making
Cons
• US Business
• Costs
• Competitors

15. Should Yum Brands modify its menu
to meet Chinese taste ?
YES
 Stiff Competition from McDonald and International
& Local Players.
Growing Concern Related to lack of healthy nutrition
value of fast food and out break of bird flu epidemics

16. Major franchisees in China

17. Pros of Franchising in China
• Western brands are highly regarded.
• Second- and third-tier cities are open to franchising.
• It permits the franchiser a relatively lower cost of
entry into China as the franchisees pay for the capital
investments in setting up the franchising operation.
The franchiser thus bears less business risks.
• It allows the franchiser to control the standard,
quality and image of the operation.

18. Pros of Franchising in China
• It offers a fast way to expand in a vast market within
a short period of time as the franchiser may cooperate
with several franchisees at the same
time.
• Marketing and promotional programs can meet with
better support by the franchises.
• The franchiser may benefit from the franchisees local
experience and connections.

19. Cons of Franchising in China
• Because the infusion of Western culture (e.g. movies,
Internet sites, etc.) into China is controlled, many
famous American brands are unknown.
• The language difference is another obstacle. For
Western brand names to be effective they must be
translated so as to be both culturally acceptable and
easy to understand.

20. Cons of Franchising in China
• Older Chinese, being more tradition-bound, are a less
attractive target market.
• Finding and evaluating licensee candidates is tough.
• Inadequate legal framework.