Franchising in China

Entering an untapped international market can strengthen a business tremendously—but what if the costs outweigh the benefits for the market itself? China has long been an important player on the global stage, but recent advances in manufacturing, natural resources, and energy production have catapulted the expansive country to the forefront of international trade. Currently the world’s fastest growing major economy, China is set to eclipse the United States as the world’s largest economy by 2016. Among various domestic and international plays, one of China’s most fascinating uses of its

Sociocultural factors influence and restrict consumption ideas, needs, desires and purchase behavior. People from different countries and different regions have different life patterns and different sociocultures. These differences directly influence the products that industries want to produce because people may even have different attitudes and value toward the same product due to different sociocultural factors. With the rapid development of modern society and the continuous improvement of living standards, the degree of attention paid to health has increased. “Franchise businesses continue to pay close attention to their customers' need for convenience, new flavors and, yes,

Despite Yum! brands huge success in china, there have been a lot of risks and threats in entering the local market. In respect to that its critical to mention the oppositionof the local population in perceiving fast food industry and especially western culture entering their own market.

Franchise means “privilege” or “freedom” and the word originates from an old French dialect. The history of franchising can be traced back to the Middle Ages (476 A.D. – 1453 A.D.) when kings granted franchises to specific people or groups to perform a certain type of commercial activity or hunt on their land. German breweries in the 1840s also used franchising to distribute their beer to different geographic areas. The breweries granted the franchises to certain taverns to be the sole distributor of their beer in a specific area. Isaac Singer was known to pioneer the use of written franchise agreements. In the 1850’s, Isaac Singer started granting franchises for its sewing machines because he wanted to distribute his sewing machines to customers

Thus, Chipotle must find a way to differentiate itself from other western restaurant chains, while integrating itself into the Chinese culture. It can use its capital and reputation for using local and sustainable ingredients to build a strong brand—a core competency that will give it a competitive advantage in the Chinese market. In a large, international city like Shanghai, local street food is cheap, but people will still want to dine at higher-end western restaurants because of that entails a higher status (Maxfield,

Franchising is defined as “a commercial agreement between a party that owns a trade name or trademark (the franchisor) and party that sells or distributes goods or services using that trade name or trademark (the franchisee) (Kubasek et al., 2015, p. 431). There are key advantages for choosing a franchise when starting a new business. First, there is many times instant brand awareness that is identifiable by potential customers, which you as a new owner do not have to concentrate on building. Secondly, on-going marketing of your business is backed by the power of the established brand, and could be as simple as contributing a fee to a advertising fund that is driven by the franchisor. Thirdly, the Return on Investment (ROI) will most likely be faster as the customers are “ready-made” and eager to buy your product or service. Fourthly, the franchise model provides a built-in support model, both from the franchisor and from other franchisees throughout the region and nation. Lastly, the franchise will provide consistent and extensive training in every aspect of the business (Goldberg, 2015).

With great assessment and researching, the pros have outweighed the cons. I’ve visited China several times and first hand saw the need for a fast food chain line ours. American and western investors and businessmen who live and work in China will also welcome our cuisine as well as the growing middle class. Western culture has been increasing in China and millennials are living like westerners’ their age. Something to keep in mind is that Chinese are health conscious just like western millennials are and we therefore has to accommodate that need as we stated doing in the US to stay popular among out top customers. “As Chinese consumers earn more discretionary income, they want the quality, brand, convenience, and service associated with Western brands. Consumers often buy goods and services at stores, restaurants, and service establishments that are franchises, thus many US franchises help fill the needs of China’s fast-growing middle class. This group is largely a young, upwardly mobile, and aspirational two-income family demographic with one child and considerable discretionary income. The large group of middle- and upper-class consumers can afford to buy more than basic necessities, and many members want to show their wealth through what they buy—for example, by purchasing a cup of expensive foreign-branded coffee and walking around with it. They are purchasing big-ticket, branded items—often on their credit cards”. (Chinese Business

Due to recent advances in technology, communication, and transportation, companies are no longer confined to just one country to market and sell their products in. This has presented many companies with global opportunities. China, one of the fastest growing countries in regard to economy and population, presents a very appealing market to businesses looking to expand. China has a growing middle class that no longer has to be as price sensitive (Barton, Chen, Yin, 2013), and this is good news for American companies that have a strong brand name and do not necessarily rely on a cheap price to sell their goods. China is also experiencing an increased demand for biscuits and crackers, but many people are also becoming more health-conscious (“Entering the Biscuit Market in China: There is Still a Chance,” 2014). These presents Nabisco, a strong brand name in the United States, the perfect opportunity to expand their graham cracker line into China.

Since the Subway restaurant chain started in 1965, it has opened more than 30,000 stores in 87 countries during the past 40 years. In Western countries, Subway is very popular and famous for its “stylish and nutritious” concept. More importantly, Subway brings the idea of health into the fast food industry. Because of the nutritious sandwiches and low fat ingredients, Subway receives considerable acclaim in Europe and America. Moreover, some professional magazines pay many honours to Subway, such as America's Top Global Franchise” in 2009 and “Annual Franchise 500® listing” for 16 of the past 22 years.（Subway Chain Fact, 2006）However, in Chinese market, the development of Subway has not

The Advantages and Disadvantages of Franchising in France 1 Running head: International Trade: Licensing and Franchising The Advantages and Disadvantages of Franchising in France Presented by: Deon E. Boswell Of Team McWorld University of Maryland University College AMBA606 November 4, 2005 The Advantages and Disadvantages of Franchising in France 2 Executive Summary The tremendous growth in franchising over the last decade can be traced directly to the explosion of growth in international trade and globalization. As organizations, attempt to enter new markets they are finding that direct investment via subsidiary creation is an expensive proposition and that their capital expenditures could be used for other opportunities

This report analyses the expansion of Michel’s Patisserie into the Chinese market through the creation of joint venture franchise agreements. Michel’s will be evaluated based on the motivations for expanding to China, process of internationalisation, choice of entry mode, and standardisation versus adaptation decisions. This analysis will be undertaken so that recommendations can be made to determine the most effective means of securing the future success of Michel’s in Shanghai. It will be demonstrated that while the motivations for expansion were fundamentally sound

The marketing and advertising advertisements created by the franchisor leave franchisee with more time to focus on the daily operating of business. This is a win-win for both parties. It helps increase sales by means of franchise, which, on the other hand, allows the parent company to collect more fees. (Bernd H. 2008)

In the past decade, China’s demand for catering services witnesses a double-digit rise (HKTDC Research, 2013). According to the restaurant markets in China report, it states that the demand for restaurant services will increase continuously at around 9% by 2023 (Reuters, 2014). First, the increasing demand results from the fast development of society. Nowadays, people are able to improve the living standard and have more disposable income. Middle-level citizens pursue the quality of life; therefore they patronize various restaurants and have different experiences. Also, the increase in middle-level population with the purchasing power leads to the rise in eating out frequency (HKTDC Research, 2013). In addition, in a highly competitive catering industry, the restaurant makes great effort to provide the

At first, when a brand chooses to enter a new market, most of the merchants would choose to open a single or minority shop to begin the business. However, it is difficult to bend into the market and give the customer a deep impression. But franchising solves the problem of it. When Subway recruits a batch of franchisees, it can help them begin the business in the meantime, so that it quickly forms the economies of scale and expansion. It is not only save the time, but also have a big impact on the market. Now, more and more people know the Subway and have a high identification though promotion. Secondly, franchising helps Subway achieve standardization. It requires central purchasing that it is effective to control the unity of products’ quality and price and save the cost of decision. What is more, it offers a standard training for the stuffs. At ordinary times, we all can see every Subway sell the same sandwiches, have same ads and same requirement of stuffs. In addition, franchising is help the Subway enter into Chinese market with minimal entry costs. Because the local franchisees will help assume many cost and responsibility for the Subway. Like the cost of decoration and the advertising. At last, franchising allows the focal firm to avoid trade barriers associated with exporting and FDI,

Political & Legal environment: The political system of a country is an important part of a companies marco-environment. ‘Who governs the country?’ ‘What does the government follow?’ and ‘What legal regulations follow from these policies?’. The most important factors a company is subject to are policy uncertainty, macro instability, and tax rates. Considering China is a country in transition all of the above factors are subject to change, to a degree substantially larger than it is in stable developed countries. We have recently seen changes happening in China on all of the above factors. One example is the new regulations regarding copying, which turned out in favor of Starbucks. However, what will happen in the (near) future is hard to tell. Whatever happens though, Starbucks will be subject to the consequences, whether positive or negative.