CHINA FRANCHISE NEWS
Vol. 2 , No. 4 - February 12, 2001
TOPICS THIS ISSUE:
- Shanghai Supermarket Giant Invades Beijing
- Lanzhou Pharma Chain Stores in Prosperity
- Already-Cooked Chicken Not Sold in Shanghai
- China will Strictly Rectify and Regulate Unfair Competition
- Taiwan's Laundry Chain Tumbles into China Market
Shanghai Supermarket Giant Invades Beijing
It was reported that three big retailers separately based in Beijing and Shanghai signed an agreement on Feb. 3, 2001 to run a new business - Beijing Xidan Hualian Supermarket Co., Ltd. and plan to open 500 outlets in Beijing within the next 3 years. This is the first time that Beijing and Shanghai chain store giants are cooperating beyond local borders. These 3 companies are Beijing Xidan Department Store, Beijing Chaoshifa, and Shanghai Hualian Supermarket.
Shanghai Hualian Supermarket keeps ahead of the supermarkets nationwide with more than 682 outlets in the country. Last year it became the first publicly listed supermarket. In order to develop the potential market in Beijing, Shanghai Hualian has Xidan Department Store, the retailer flagship of Beijing, as its partner. It is estimated that the new giant will operate more than 500 outlets in Beijing during the next 3 years with sales up to 3 b RMB and profits no less than 20 m RMB. The first 100 chain stores will be open by the end of this year.
Insiders predict that in the next few years chain stores will take market share from the traditional hypermarkets in China. Now the international retail giants, e.g. Carrefour and Wal-Mart, are pushing ahead in China. Beijing Xidan Hualian Supermarket expects to compete successfully with the foreign retailers.
(Source: Beijing Youth Daily 02/04/01)
Lanzhou Pharma Chain Stores in Prosperity
During the past year 2000, the pharmaceutical retail business in Lanzhou, China prospered. Pharma chain stores developed rapidly and created convenience and benefits for ordinary people.
Zhongyou, one of the pharmacy chains in Lanzhou, opened 11 direct-invested stores during the last 4 years and most recently opened Zhongyou Pharma Town.
(Source: Consumer Daily 01/22/01
Already-Cooked Chicken Not Sold in Shanghai
In 2000, Chinese investors were excited by the news: "you might purchase a KFC restaurant for just 8 m RMB". Many Chinese bought into the KFC franchise since it is an "already-cooked chicken" that needs no preparation, so to speak.
However, Shanghai has been excluded from KFC's shortlist of places that will be allowed for "non-zero beginning" KFC franchise, according to an official from KFC-controlled China Baisheng Food and Beverage Group (CBFBG).
Why not Shanghai? Xu Zhen, manager of CBFBG's Public Relationship Department released that "KFC has certain standards for selecting locations for the special franchise permit. They should be small and medium-size cities with a non-agricultural population between 150,000 to 400,000 and with an average per capita consumption over RMB 6,000. The franchise permit should not be issued to big cities with saturated food and drink businesses."
Xu also added, KFC's operations in Shanghai, Beijing, Suzhou, Wuxi, and Hangzhou take the form of joint ventures. These cities are therefore not currently considered for the special permits.
The first special permit for operating an existing KFC restaurant was given to one in Changzhou, Jiangsu province. The acting of turning a well-managed and profit-generating KFC restaurant into a new franchise member has "Chinese characteristics": The operator does not have to start from scratch, thus avoiding a great amount of complicated initial work such as location selection, opening procedures and employee recruitment. To buy an "already-cooked chicken", therefore, can greatly reduce the operating risk and increase the probability of success for new franchisees.
However, it is not an easy thing to buy an "already-cooked chicken". For example, in the case of the KFC restaurant in Changzhou, the new franchise manager, Gu Xiang, underwent 20 weeks of training. He then obtained the managing and operating rights of this restaurant from KFC's Shanghai headquarters after paying 8 m RMB for the initial fee, decoration, and importing equipment. In addition, Gu must commit to operating the restaurant for a minimum of 10 years. During this period, he must also pay KFC 6 percent of annual business revenue for royalty fee and 5 percent for advertising fees. It is estimated that the early operation of a restaurant requires capital of 2 to 3 million RMB.
(Source: Xinhua News 02/02/01)
China will Strictly Regulate Unfair Competition
During the upcoming period, the different levels of Administration for Industry and Commerce (AICs) of China will inspect and punish severely unfair competition and monopolistic practices.
The AICs will severely penalize several actions: passing off proprietary names or packaging of famous products; falsely publicizing or denigrating products; fraudulent lottery sales, bribes, and infringements of trade secrets, said Wang Zhongfu, director of the State Administration for Industry and Commerce (SAIC).
In monopolistic sectors such as electricity, insurance, railway, post, and commercial banks, AICs will penalize monopolistic practices.
This year AICs will closely regulate medical, pharma, healthcare, real estate, and food advertisements.
AICs will severely punish trademark infringements and protect well-known trademarks and the trademarks of state-owned enterprises.
(Source: Xinhua News 02/01/01)
Taiwan's Laundry Chain Tumbles into China Market
Taili Laundry Chain Store, Taiwan's largest laundromat chain, is teaming up with Dingxin International Group to move into the mainland laundry market. One of the reasons is that mainland laundromat management and technology is 10 years old, says Taili Laundry.
Taili Laundry Chain Store and Dingxin International Group will raise 200 million New Taiwan Dollars (US$6.18 million) to establish 20 plants and 1,000 franchises in the mainland. Officials at Taili Laundry said that if everything goes smoothly, they will set up a company in Beijing by March. They have rented a laundry plant to pave the way for the chain.
The company is expected to set up standard centralized small-size plants during 2001 in an effort to explore more chain store markets in both Taiwan and the mainland. Equipment at the proposed mainland plants is expected to be ordered from local factories, which should reduce start-up costs by more than 10 percent.
Beijing, the largest laundromat chain store market in China, is home to about 5,000 laundry chain stores, led by Shanghai Zhengzhang, Beijing Pride Washing Co. and the nationwide brand, Rongchang. Each of these companies has 100 to 200 chain stores.
The laundry business has great room for development in the mainland, as average monthly spending on laundry is US$1.24, compared with US$1.73 in Taiwan and US$5.56 in Japan. These statistics make clear that there are not yet many laundromats in the mainland.
(Source: ChinaOnline News 02/02/01)
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