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Franchising in China (Part 2 of 4)

Doing Business In China

Franchising in China (Part 2 of 4)

Written by Angela Ly for Gaebler Ventures

This second article discusses the role of the government in franchising, and also areas of franchising in China that have withstood harsh economic conditions.

The Chinese government has supported the growth of franchising as it adds value to China in the economic and social context.

The entry of foreign franchisors spurred improvement in the operations and product offerings of local businesses, in the latter's quest to be more competitive. It has also created jobs for many local Chinese. Franchising has also sparked off an interest among those who want to be entrepreneurs to try their hand at running a business.

The China Chain store and Franchise Association (CCFA) and China International Franchise Association (CIFA) hold annual franchise conventions. In 2008, the China Franchise Expo reached its tenth year of running, and has grown dramatically in terms of size and number of visitors over the years.

The CCFA notes that both local and foreign franchising concepts are being introduced to interested entrepreneurs. Local business owners who want to expand their businesses increasingly find franchising an attractive option for doing so.

Findings from a survey conducted by the CCFA on development trends of the franchising industry of China revealed that the education industry, in particular children's education and training, is a promising one. According to the survey, the experts felt that the education industry did not require a high level of investment but offered the highest return on investment.

Even in the case of a slow economy, they are optimistic about the prospects of children's education and training. With the economic downturn, fresh graduates and unemployed people have also turned to skill trainings and courses to improve their employability. Evidently, the economic crisis has little adverse impact on the education industry, and it is also a stable long-term investment project.

Children are undoubtedly making a significant impact on the spending habits of Chinese households. China's one child policy has created a pampered generation, even more so for male children, affectionately dubbed 'little emperors'. Products and services catering to their educational development, health, or simply their whims and fancies have proven to generate large sales volumes.

These children have a liking for Western products, such as toys and food. Parents are also willing to spend on their children's growth in terms of education. Chinese parents enroll their children in intensive English classes, as well as piano, ballet, computer and gymnastics lessons, among others. Hence, the opportunities for franchise businesses that attract Chinese children are enormous.

Products and services aimed at women also sell, like in many other parts of the world. Women spend large sums on clothing, accessories, cosmetics, gym and spa memberships. Chinese women have also developed a taste for global brands, and are willing to experiment with new product types. With clever marketing, franchisors could expect successful positions in this market.

Angela is currently an MBA student at Nanyang Technological University in Singapore. Ms. Ly is looking to specialise in Finance, and has an interest in exploring topics in entrepreneurship and strategies for small businesses.