CHINA Law and Practice Contributed by: Qiang Ma and Yan Feng Liu, Jingtian & Gongcheng
1. An Introduction to Franchising 1.1 Franchise Market Overview The Chinese Franchise Market Landscape The commercial franchise market in the People’s Republic of China (PRC) is characterised by its signifi - cant scale and rapid development. The modern fran - chising model was introduced to China in 1987 with the arrival of the international fast-food brand KFC. This was followed in the 1990s by the adoption of the model by prominent domestic enterprises, including the restaurant chain “Quanjude” and the sportswear brand “Li Ning”. Since the implementation of the Regulation on the Administration of Commercial Franchises (hereinafter “the Regulation”), China’s franchising industry has maintained a stable and rapid development trend, characterised by robust growth in sales, store expan - sion and significant economic impact. According to the “2024 Top 100 Franchise Chains in China” list, the total sales of the top franchises reached CNY504.6 billion, a year-on-year increase of 17.3%. The total number of chain stores surged to approximately 257,000, reflecting a remarkable year- on-year growth of 26%. Among these, franchised stores accounted for 222,000, an increase of 55,000 compared to the previous year, representing a year- on-year growth of 33.3%. The market is highly diversified across multiple sec - tors. The top 100 companies operate in ten major categories, including catering, accommodation, auto - motive aftermarket, training and education, lifestyle services, beauty and wellness, specialty food retail, non-food retail, business services, and convenience stores. The industry is also a crucial employment driver, providing about 4 million jobs. On average, each top franchise company operates 2,550 stores. The total social investment driven by these enterprises exceeded CNY170 billion. A key strength of the leading franchises is their mature management systems and professional expertise, which have enabled sustainable growth. In 2024, 50% of the top brands had been operating for over 20 years. The average franchise renewal rate stood at
85%, and the multi-unit ownership rate was approxi - mately 30%. The “2024 Commercial Franchising TOP300” report further highlights the industry’s expansion. The total number of stores among the TOP300 enterprises reached 830,000 – a significant increase of 30.73% compared to 2023, marking the highest growth rate in recent years. Notably, the number of brands with over 10,000 stores doubled from nine in 2023 to eighteen in 2024. Key International and Domestic Brands Active in the Market The Chinese franchising market is vibrant and com - petitive, with strong participation from both domestic and international brands. Domestic leaders Well-known Chinese brands have achieved massive scale and consumer loyalty. In the catering sector, brands like Mixue Bingcheng, Heytea and Luckin Cof - fee have extensive networks. Retail and convenience stores are dominated by powerful domestic chains such as Meiyijia, Hongqi Chain and Bianlifeng. In the automotive aftermarket, major domestic platforms like Tuhu and Carzone are significant players. International giants Global brands continue to thrive and expand their footprint in China. The catering landscape is heav - ily influenced by giants like McDonald’s, KFC, Pizza Hut, and Starbucks. International convenience store chains, including 7-Eleven, FamilyMart and Lawson, maintain a strong presence in major urban centres. This combination of deeply rooted domestic champi - ons and adaptable international corporations defines the dynamic nature of China’s franchising market, driving innovation, consumption and employment across the country. 1.2 Franchise Regulation The Regulation was promulgated by the State Coun - cil of the PRC and has been effective since 1 May 2007; this is the foundational and highest-level admin - istrative regulation specifically governing franchising activities nationwide.
33 CHAMBERS.COM
Powered by FlippingBook