CHINA FRANCHISE NEWS
Vol. 3 , No. 11 - September 06, 2002
TOPICS THIS ISSUE:
- Pizza Hut not ready to begin Franchising in China
- 7-Eleven Prepares to Open in Beijing
- Nippon Oil to Retail Gas, Heavy Oil in China
- Retail Giants Retained as Consultants for Tianjin
- Taiwan President Group to Open 500 Chain Stores in Beijing
- Potential for Community Commerce to Grow in China
Pizza Hut not ready to begin Franchising in China
While franchising, as a new mode for doing business is sweeping China, Pizza Hut, one of the world most famous restaurant chain brands, is still looking on.
Pizza Hut is under great pressure to open new restaurants. Recently, Pizza Hut opened a flagship chain restaurant in the Jinglun Hotel. The newly open restaurant is by now the biggest one in China and with very distinctive decor.
This was further confirmed by Xu Zhen, an employee of the department of public relations of Yum! Brand, Inc., the parent company of Pizza Hut that Pizza Hut is not ready to begin franchising in China and does not plan to do so in the near future. She explained that the concern here is to protect the brand image and to stick to the same high quality and unified image and standard.
It is knows that KFC, also a brand under Yum! Brand, Inc., has begun to operate franchise in China since 1993. At present, there are 28 franchising restaurants, among which 20 restaurants are new restaurant built by overseas franchisees, while the remaining 8 are purchased from existing restaurants by local franchisees. The reason for not allowing local franchisees to directly build new restaurants is to reduce their risks.
Pizza Hut entered into China market in 1990, and now operates about 80 restaurants, while KFC has run over 600 restaurants allover the country. Xu Zhen explained that this is due to Pizza Hut's strict requirements on the choice of restaurant spot and the quality of foods and services. Another reason that the number of Pizza Hut restaurants does not increase quickly like KFC does may be that Pizza Hut does not allow franchise while KFC does. It is anticipated that Pizza Hut will open chain restaurants in some medium and small cities so as to boost its business development in China.
(Source: Economy Daily)
7-Eleven Prepares to Open in Beijing
7-Eleven, the world's largest chain store operators, anticipates selling Slurpees and Big Gulps in Beijing by early next year.
The company said that it had chosen Taiwan's President Chain Stores and 7-Eleven Japan to operate the stores in Beijing.
7-Eleven Japan has over 8,000 convenience stores in Japan, while President Group Chain Stores operates 3, 105 outlets in Taiwan. They are two biggest 7-Eleven operators outside the US.
The Dallas-based company said that it would also choose a Mainland Chinese partner which will own 35 percent of the proposed joint venture.
7-Eleven has neither concluded the agreement with the Chinese government on the proposed Beijing project, nor signed contracts with the two chosen licensees.
According to the company spokesman, the negotiation is still in progress and the contacts will be finalized by the end of the year.
Last week, 7-Eleven opened its 100th stores in the southern province of Guangdong Province.
(Source: Financial Times)
Nippon Oil to Retail Gas, Heavy Oil in China
Japan's largest oil refinery, Nippon Oil Corp. recently announced that it would start retail sales of gasoline and fuel oil in China in 2005, including plans to set up gasoline stations in Shanghai.
The company, formerly called Nippon Mitsubishi Oil, plans to set up a wholly owned subsidiary in Shanghai in November, with a proposed capital of 150 million yen (US$ 1.26 million), to enter the retail market.
A company spokesman explained that Nippon Oil's new plan is aimed at the Chinese market because the government will open the domestic retail market in 2005 and also because of the large growth potential for energy demand in the country. The new firm will retail fuel oil to local power firms and factories operated by Japanese manufacturers. According to the spokesman, the company is also planning to open petrol station in Shanghai by forming an alliance with Chinese oil firms. It is expected that the fuel oil and gasoline will be produced from both exports from Japan and local oil firms.
According to industry sources, the fuel oil market in China is growing at an annul rate of about 5% a year, to about five million barrels a day in 2001. However, in comparison, Japanese refiners are under high pressure to combat weak fuel oil demand, especially from electric power firms, and the refining capacity in Japan is in excess.
In an effort to reduce fuel oil surplus in Japan, Nippon Oil also said that it would sign a six-month term agreement with Chinese oil giant, Sinopec Corp, to supply fuel oil to China.
(Source: Reuters)
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Retail Giants Retained as Consultants for Tianjin
In an effort to enhance Tianjin's commercial development, the municipal government of the northern port city has retained top three retailers as consultants. The three commercial consultants include Tuzes, president for China area with Metro, Zhang Jiasheng of Wal-Mart and Jean-Luc Cheau of Carrefour.
According to Li Shengjin, Tianjin's mayor, he hoped that the consultants would bring advanced management methods and marketing skills into Tianjin, while maintaining their investment in the city.
Tianjin, a traditional commercial city in north China, has witnessed stern competition among international retail enterprises in recent year.
(Source: Xinhua News Agency)
Taiwan President Group to Open 500 Chain Stores in Beijing
According to Gao Qingyuan, the Chairman of Taiwan President Group, the company is confident in opening another 500 convenience stores in Beijing and anticipated that it will cover its costs and make profits within 2 to 3 years.
Gao also said that President Group is now endeavoring to get a license from US 7-Eleven Inc., to open 500 convenience stores in Beijing together with Japan 7-Eleven. However, as 7-Eleven has not begun formal negotiation with President Group, Gao was not willing to comment further.
Recently, President Group became very active in developing its operations in the Mainland China market, investing in factories that manufacture instant noodles, soft drinks and forages. Gao Qinyuan said that to date, President Group owns 50 factories in Mainland China, with more than 20,000 employees.
(Source: Xinhua News Agency)
Potential for Community Commerce to Grow in China
Community commerce is expected to undergo rapid development in China, according to a forum on community commerce development planning recently held in Beijing. Community commerce has developed rapidly in major cities of the country in the past year. In Beijing alone, 17 commercial businesses where opened in community areas in the first half of this year. Some foreign retailers are also opening community chain stores in the city.
Industrial sources predict that in the coming ten years, community commercial consumption is expected to account for approximately one-third of the social commercial retail sales in China.
(Source: Asia Pulse)
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The China Franchise News is intended to be used for news purposes only. It should not be taken as comprehensive legal advice, and Lehman, Lee & Xu will not be held responsible for any such reliance on its contents.
