CHINA FRANCHISE NEWS
Vol. 2 , No.20 - November 21, 2001
TOPICS THIS ISSUE:
- Foreign Multinationals Win Domain Name Case
- China's Retail Sales Pick up in October
- Singapore's Thai Village Grants License for Franchises in China
- Warm-up Seminars for Retailing Giants on Both Sides
- Carrefour to Continue China Expansion after Wrangle Settled
- Peking Duck Re-examines its Franchise Policy
Foreign Multinationals Win Domain Name Case
A Beijing court has ruled in favour of 11 multinationals that took two cybersquatters to court.
The two defendants, Guangzhou-based Yuejing Information Network and Beijing Guowang Information, were ordered to stop using domain names of KFC, Boss, Dow, Loreal, UPS, Bacardi, Elle, Movado, Nine West, Olay and Subway, under a Beijing Intermediate Court ruling. The two defendants were also ordered to apologize in a national newspaper. Beijing Guowang was ordered to pay damages of about US$1200.
The court decision will be final if no party files an appeal with the Higher People's Court of Beijing Municipality within 15 days of receipt of the judgment.
However, the Beijing court did not rule on whether the trademarks are well-known. The court only determined that the defendants registered the domain names in bad faith.
In a landmark 1999 ruling, the same Beijing Intermediate Court had ruled in favour of Swedish furniture chain IKEA in a domain-name dispute. In its judgment, the court announced that "IKEA" is a well-known mark and should be protected under the Paris Convention. The recognition of a well-known mark was essential to the Ikea case because no specific laws, regulations or court interpretations were available for domain-name disputes at that time.
This week's decision was made under the guidance of the Interpretation of the People's Supreme Court on Domain Name Disputes issued on July 17, 2001.
(Source: SCMP.com, 15/11/2001)
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China's Retail Sales Pick up in October
China's social retail sales of consumer goods in October rose 10.5 per cent on a year-on-year basis to reach 334.73 billion yuan (US$40.49 billion), 0.6 percent higher than that for September. It was the third month of consecutive growth in retail sales this year, according to the National Bureau of Statistics. For the January-October period, the social retail sales of consumer goods amounted to 3,014.02 billion yuan, up 10.1 per cent over the figure for the same period of last year.
(Source Xinhua News, 15/11/2001)
Singapore's Thai Village Grants License for Franchises in China
The Singapore-listed Thai Village Holdings Ltd. has granted a non-exclusive franchise license for the operation of Thai Village restaurants in Tianjin Municipality.
The license agreement was signed on November 8 between Thai Village Holdings Ltd. and Chinese resident Wu Guowei. Under the Agreement, Mr. Wu was granted a five year license, renewable for another five years. A joint venture named Sin-Thai Restaurant Co. Ltd. will be established within 90 days of the signing to operate the restaurants.
The first restaurant, with a seating capacity of 500, is scheduled to open in Tianjin in the first quarter of next year.
(Source: Asia Pulse, 12/11/2001)
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Warm-up Seminars for Retailing Giants on Both Sides
Managers of nearly 100 big retail businesses in Beijing gathered on November 11 for a lecture on strategies to compete with US retail giant Wal-Mart.
Dr. Kenneth Stone, a professor from Iowa State University, briefed local retail business leaders on the impact Wal-Mart has had on medium-sized and small retailers in the United States. The professor has been doing research on the U.S. retail giant for about 20 years.
Coincidentally, on November 6, over 20 famous foreign retailers shared their common experiences and looked at China's market potential at the 2001 international logistics modernization forum. These foreign giants, including Wal-mart, Carrefour, German Metro and other retailers from the US, Japan, Europe, Hong Kong and Taiwan, have been making their presence felt in China in recent years and are seeking a larger share of the retail market after China's entry into the WTO.
According to official figures, overseas investment accounts for 2.5 per cent of all retail sales in China.
(Source: Xinhua News, 12/11/2001, Asia Pulse, 7 /11/2001)
Carrefour to Continue China Expansion after Wrangle Settled
French retail giant Carrefour's expansion programme in China, held up in recent months amid bureaucratic wrangling, is set to resume after an agreement with Chinese authorities was approved Friday.
An accord ending the disagreement was formally approved by China's State Economic and Trade Commission on Friday, Carrefour chief executive Daniel Bernard told AFP. This came during a visit by French Finance Minister Laurent Fabius.
Approval had also been reached two days ago for the group to open new outlets in the prosperous southern province of Guangzhou. It had additionally been agreed that Carrefour would establish 10 purchasing organizations in China to buy products for sale overseas, he said.
The agreement, reached two days after rival US retail chain Wal-Mart was granted permission to open its first supermarkets in Beijing, marks the end of a disagreement between Carrefour and Chinese authorities which blew up last year.
After the opening of its first Chinese supermarket in Beijing in 1995, Carrefour expanded rapidly, opening 27 stores in all, including four in Beijing and six in Shanghai. Each of these stores was a joint venture with Chinese partners, approved individually by local authorities.
But at the end of last year the State Economic and Trade Commission decreed the store openings were contrary to regulations as they had not been approved by central authorities. So Carrefour embarked on a restructuring of its organization in China to conform with the wishes of both local and central authorities.
Carrefour's operations in China had a turnover of 963 million dollars last year.
(Source: Agence France Presse, 09/11/2001)
Peking Duck Re-examines its Franchise Policy
Quan Ju De, the culinary home of Peking duck for more than 100 years, may look undistinguished, with its plastic tablecloths and bustling take-out at the back door, but it has hosted world leaders for generations, and now has to fight against domestic and foreign imitators trying to exploit the valuable brand. The official pronunciation of the Chinese capital was changed several years ago from Peking to Beijing, but Peking duck was one of two institutions - the other is Peking University - allowed to keep the old style.
Mrs Fu Weihong, deputy chairman of the Quan Ju De group, acknowledges that Quan Ju De - which translates loosely as "complete, together and ethical" - has made mistakes. A few years ago it embarked on a program of franchising in several areas of China. Today she observes ruefully that the extra revenue has not offset the damage that was done by franchisees offering sub-standard duck.
The best Peking duck, which is rolled with onion and a sweet sauce into a thin pancake, should have crispy skin and tender meat. But there are several pitfalls. If the pancake is leathery, the sauce too sweet or the skin too fatty, the whole dish suffers.
Out of the 50 restaurants bearing the Quan Ju De name in China, 41 are franchise businesses over which the Beijing-based Quan Ju De group has little control. Several others are pirate operations that copied or imitated the Quan Ju De logo to lure customers.
"We had one called Tong Ju De but they wrote the character for Tong in such a way that it looked just like the character for Quan," said Mrs Fu. "It had a big effect on our brand. They sold greasy duck in plastic bags at discount prices."
The company won a lengthy trademark infringement case against Tong Ju De in 1998, and the imposter was closed down. But other pirates have emerged - one is being sued and another, which has set up shop in Toronto, is under investigation.
From now on, Quan Ju De will try to ensure that all new restaurants are owned and run by the group. To raise the funds for this it plans to list on the domestic A-share market to raise RMB 300 million (US$ 36 million). The proceeds will be invested in three new theme restaurants in Beijing.
But while Mrs. Fu worries about imitators, she is not concerned that China's WTO entry will spur an upsurge of competition from foreign restaurants in China. "I once had Peking duck in England. It was terrible," she said.
(Source: Financial Times (London), 10/11/2001)
PRACTICE NOTE: Quality control is the biggest headache for franchisors. Lehman, Lee & Xu can help you draft and enforce franchise agreements which maintain product quality.
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