Franchising in China Country Report by CCFA

1
Franchising in China -- Country Report by CCFA

• March 7, 2006, Tokyo, Japan

2
About CCFA

• ???1997?,????????????????????????????
• Established in 1997,CCFA is the leading
  official industry association in retailing and
  franchise fields in China.

3
About CCFA

• ??,?????1,000?,??????900?????????????????????????,
  ??????,??????????????????????50?
• Nearly 1,000 corporate members, consisting of
  domestic overseas companies.
• Food retailing, general merchandise, specialty
  stores, restaurant to commercial individual
  services.
• The total revenue 90 billion US dollars this
  year.
• Half our members are franchisors.

4
The Services to Our Members

• ????,??????????????
• participation in legislations and industry
  standards development
• ???????????,?????????????????????
• training education courses of retailing
  franchise, industry studies
• ?????????.
• industry studies, and information
  services
• ??????????????????????????
• Franchise Retailing Exhibition and
  Conferences

5
The history of franchise development in China

• 80???,???????????????????????
• At the end of 1980s, some well-known
  international franchise brands, began to enter
  Chinese mainland market.

• 90???,??????????????
• In the early 1990s, some domestic companies
  started to try this relatively new business
  model.

• 1997???????????????????(??),?????????????????
• In 1997, Ministry of Internal Trade promulgated
  Trial Measures for Regulation of Commercial
  Franchise

6
The history of franchise development in China

• 1999?CCFA????????????,??????????????????
• In 1999, the first China Franchise Expo
  Convention was held in Beijing by CCFA.

• 2002?,????????????,???????
• In 2002, Franchise Code of Ethic was issued by
  CCFA, aiming at standardizing and promoting
  franchise activities.

7
The history of franchise development in China

• 2003??????????1900?,????????????
• In 2003, there were 1900 franchise systems
  operating in China, which made China the largest
  number of franchise systems in the world.
• 2004??,????????????????
• At the end of 2004, Measures for Regulation of
  Commercial Franchise was promulgated by Ministry
  of Commerce.

8
The present development status of franchise
operations

• ?2004??,?????????2100?,?????10.5,??12??,?????38.
  
• The number of franchise systems in China amounted
  to 2100 by the end of 2004, an increase of 15
  from the previous year.

9
The business category
Franchising Penetrating in more
industries ???????????????
???? Education Services
14.4 Others
31.6 FB
????House Services
2.2
?? Toggery
?? Drugstore
6.6 BF
?? Appliance shop
???? Automobile Services
8.1 House Service
???? Housing accouterment shop
4.7
8.6 CVS
1.0
???? Beauty
6.9 ET
2.5
3.1
5.8
?? Book store
?? Others
10
The franchisors in China

• ?????????????????????????????????,?????????????
  ???????,??????????????4-50????
• At present unit franchising is more popular with
  Chinese mainland franchisors than area
  development master franchise. The initial
  investment needed to establish an individual
  outlet ranges from 40-500 thousand USD.
• The most difficult problem franchisors in China
  encounter currently is some franchisees dont
  follow the agreement.

11
The franchisees in China

• ????????????????????????????????????????????????
  ??????????????????????????????????????????????
• The supports the franchisees want are operation
  management, training, technology, promotion and
  advertising.
• The areas that franchisees want franchisors are
  to improve equal treatment and provide more
  know-how transfer.
• Among the activities conducted by franchisors,
  the franchisees are most interested in training
  and experience sharing.

12
The potential franchise investors in China

• ?????????????????,2005???45,000?????10-50??????
  ,50???????????????????????,?57?
• The number of participants to the franchise expo
  is increasing rapidly, reaching 45 thousand in
  2005.
• The majority of visitors investment capability
  is between 13 to 63 thousand USD.
• The majority of potential investors are
  individuals, accounting for 57.

13
Who want to buy foreign brand

• ??????????217????,?????19.4,100??????19,????????
  ?42.4,???????????????????????,?????????,?????,???
  ???30-40??52.5?
• Many people want to buy a foreign brand
  franchise.
• Institutional investors account for 19.4.
• 19 potential investors are able to make an
  investment over 125 thousand USD.
• 42.4 intend to buy a master franchise.
• The most interested industries are fast food
  restaurants, specialty stores, apparel. The most
  desirable brand origination is US.
• 52.5 percent of the individual investors are
  between 30 to 40 years old.

14
The development of foreign franchise brands in
China
15
Foreign Franchise Brands in US entered Chinese
market

16
What CCFA can assist you

• ??????????????
• Providing information about industry policy,
  regulation and market situation

• ????????????,?????,?????????????????????????
• Providing opportunities for franchisors to
  recruit franchisees through two franchise expos,
  Beijing expo held in April and Shanghai expo in
  September

• ????????????????????????????
• Hosting business opportunities negotiation
  forums for foreign franchisors and potential
  investors wishing to enter Chinese market.

17
China Franchise Expo 2006