Pros And Cons Of Franchising In China

According to IFA (International Franchising association), the definition of franchising is a business method for “expanding a business and distributing goods and services through a licensing relationship.” In short, as explained by Hyo Jin (Jean) Jeon et al. (2016), franchising means the franchisor sells the right of selling its products or services to franchisees. Moreover, as one of the forms of retailing, franchising has had the fastest growing in the world (Hyo Jin (Jean) Jeon et al., 2016).

Development status of franchising in China

Zhiqiong June Wang (2008, P167) states that franchising was introduced in china in the late 1980s under the influence of Deng Xiaoping’s economic reforms and open-door policies. According to IFA country

First of all, it’s an access to attract talents who want to work hard to gain the profit rather than take a salary as an employee. Secondly, it’s a good way to obtain expansion capital. Thirdly, franchising can help companies minimize the growth risk, which means a franchising company could put relatively little money into adding a location. Then, according to Startups Team (2003), franchising can also provide company a well-known brand which can lead to a big

First of all, the protection of intellectual property is weak in china, for that reason, many foreign brands were operated as company-owned stores or joint-ventures instead of franchises in the early stage. Besides, the Intellectual property laws are not implemented uniformly in china. Then, lack of strong management skills is another significant challenge. In addition, finding, evaluating and signing a qualified firm as local franchisees is difficulty for franchisors. Furthermore, the regulatory environment for franchising has evolved and improved in china, for instance, the ITA Franchising Top Markets Report (2016) pointed out that in December 2004, MOFCOM (Ministry of Commerce of the People’s Republic of China) issued new rules concerned the supply of franchising services in China which required that “a franchiser own and operate at least two units in China for one year before being eligible to operate franchises in China.” Finally, some franchisors have difficulty to adapt to local business environment and satisfy local customers’ need in a short time. For opportunities, first of all, china has a large number of population, according to World Population Review, in 2016, the number of population in china is 1,383,702,876 which ranks the first in the world. Then, the