CHINA FRANCHISE NEWS
Vol. 3 , No. 12 - October 10, 2002
TOPICS THIS ISSUE:
- First KFC Drive-Through Opened In China
- Tops Supermarkets Bleeding
- Angel - Avis Marriage Proposal
- FamilyMart to Enter China Next Year
- KFC Chain Stores Over 700 In China
- China To Regulate Franchising of Gas Station
First KFC Drive-Through Opened In China
With the opening of the country's first drive-through in Beijing recently, another US dining tradition has been introduced by KFC, the US-based fried chicken giant, which has obtained great success when first bringing the US-style fast food into China.
According to the Company executive, KFC is planning to open more drive-throughs to sell the Colonel's secret recipe to motorists in three other cities, as the number of the middle-class and car-owners is dramatically increasing in the country.
With the cost of nearly $1.2 million, the new drive-through locates in the northern suburb of Beijing, which is a gathering of young executives, between a supermarket and a store selling mobile phones and home appliance.
General Manager of Beijing KFC Co., Ltd, Jammy Liu said that the reason for KFC to choose the place is that there is great potential for growth because of the increasing numbers of cars driving by and the huge community.
Just opposite the new drive-through is a new apartment complex and more are under construction around the restaurant. Many in the neighborhood had cars, KFC executives said.
Tony Chen, spokesman for Yum! Restaurants China, anticipated, "In Beijing, more than 10, actually 12 percent of the population own automobiles. This is an impressive number. And they are increasing, as we speak, in many other cities."
KFC is one of the famous brands owned by Yum! Brands Inc, which also runs the Pizza Hut and A&W chains that operate several stores in Beijing.
The first KFC outlet was opened in Beijing in 1987, nearing Tiananmen Square and within sight of the mausoleum of Communist revolutionary Mao Zedong, giving many Chinese their first taste of deep-fried chicken, coleslaw and mashed potatoes.
According to Chen, KFC is going to open drive-throughs in Shanghai, Shenzhen and Guangzhou.
Yum!, which also owns Taco Bell and Long John Silver, which have not yet been introduced into China, is one of the world biggest restaurant operator with more than 32,500 outlets. It is also the largest restaurant in China, with more than 800 outlets in the country, according to the numbers released by the company.
During the trial days, there are more than 200 cars visited the new drive-through everyday. But KFC is still expensive for many families in China and is viewed as an upscale eating establishment by most Chinese. A meal at KFC would cost about 20 percent of a worker's weekly wages.
(Source: Reuters)
Tops Supermarkets Bleeding
"All the 44 Tops supermarkets in Shanghai are at loss with the amount of 2 million Yuan ( US $241,838) monthly", a senior official of the joint venture's Chinese side said.
Tops is a supermarket chain founded in early 1990 by more than 10 food fairs in Hong Kong. In June 2001, the Hong Kong property tycoon, Nina kung Wang, invested 100 million Yuan, to take control 90% of the Sino-Dutch joint company, and turned it into a Sino-Hong Kong joint venture.
Wang also purchased 6,000-mu (400 hectares) filed in Chong Ming Island to the city's east, to plan to form a close by farming products self-supply base to the Tops.
But Wang lost focus in this supermarket competition, first with her being accused by father-in-law of forging documents to inherit property from her missing husband, then her determination to obtain one of the two casino licenses China's central government it to issue for Macao.
As the result, it is no surprise that Top supermarkets have neither got benefits from the farming projects as they have been supposed to, nor prevent red numbers showing on the book as the Chinese partners have tried so desperately, but still in vain due to Wang's big share in Tops.
Tops director of the Chinese side has been reported to have requested to resign from the ceremonial post for several times.
(Source: Shanghai Daily News )
Angel - Avis Marriage Proposal
The biggest car-rental company in Shanghai, Angel Car Rental Co., which is a subsidiary of Shanghai Automotive Industry Corp, also the local partner of both Volkswagen AG and General Motors, has submitted proposal to central government for a 50-50 joint venture with Avis Rent A Car System Inc., the world No. 2 in its field.
"We are likely to receive a go-ahead in one or two months," marketing official Zhong Lei said with confidence.
If approved, the joint venture will be the first in China's Auto-service sector.
As a result of becoming a member country of the WTO in December, China now allows foreign investment to take a maximum stake of 50 percent in auto-service joint venture, subject to government approval.
To Angel's advantage, this proposal would give it an opportunity to learn management styles and marketing techniques from its US partner, which will help to develop advanced and more efficient operations, and will strengthen its domestic competition power.
To Avis, this cooperation would finally include China into its global car rental system, although details of its involvement are still unknown.
Earlier in January 2002, the two companies signed an agreement which has already started cooperative business outside Mainland China.
"We landed some deals during the Would Cup in June," Zhong said, such as providing auto-leasing service to Shanghai travelers in South Korea - Angel recruit Shanghai Traveler at Mainland, while Avis provides services in South Korea.
(Source: Shanghai Daily News)
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FamilyMart to Enter China Next Year
FamilyMart will open the first outlet in Shanghai in Spring 2003, in a tie-up with its top shareholder, Itochu Group, Ting Hsin, a major shareholder of Hong Kong listed Tingyi Holding and other partners. They also plan to open more outlets in other major cities such as Tianjin and Wuhan.
Tingyi Holding is one of the largest instant noodle makers in China.
According to the Chinese-language Commercial Times, the proposed holding company will consist of Ting Hsin (Cayman Islands) Holdings Corp., which owns about a third of Tingyi, with 55.5 percent, Itochu Group and Taiwan unit FamilyMart.
The newspaper further said, quoting unidentified sources, the holding company is seeking a Chinese partner that will owns 35 percent of the proposed joint venture and operate the FamilyMart chain in China.
Itochu has said FamilyMart plans to enter China in three years and aims to open some 3,000 franchise shops there by 2010.
(Source: CNN news)
KFC Chain Stores Over 700 In China
Tricon China, a US-based fast food giant announced recently it has opened more than 700 Kentucky Fried Chicken (KFC chain stores in China.
"KFC opened 100 chain stores in China in the first nine years after it entered China in 1987. But the year 2002 has seen the number of KFC chain stores jump from 600 to 700 within only seven months," said J. Samuel Su, president of Trion in China.
He also noted that the growth rate of KFC in China was an international phenomenon. With the most fast food chain stores in China, KFC has maintained the highest growth rate.
In the past 15 years, KFC stores have opened outlets in more than 150 cities throughout the country.
KFC also committed to spending 38 million Yuan (4.58 million US dollars) in the next decade to help china's poverty stricken students. It will also offer jobs for students in their spare time to help them earn money to complete their studies.
(Source: Xinhua General News Services)
China To Regulate Franchising of Gas Station
Recently, State Economy and Trade Commission has issued Several Opinions on Regulating Gas Station Franchising (the Opinion). The Opinion aims to regulate franchising activities of gas stations and to guide other private-owned gas station to join the gas station chains owned and operated by PetroChina Company Limited (PetroChina) and China Petroleum & Chemical Corporation (Sinopec) so as to regulate the retaining of refined oil and to effectively carry out the reforms on gas station.
The opinion defines gas station franchising as an business mode through which the franchisor license other private-owned gas stations to use trade names, registered trademarks, know-how, operation mode, operation techniques and service standards relating to the operation of gas station, and the gas station so-licensed will be engaged in retailing of refined oil and providing relating services and also agree to pay the franchisor a certain amount of franchising fee under the uniformed franchising system according to the franchising agreement.
The Opinion lists PetroChina, Sinopec and a number of authorized subsidiaries as qualified franchisor and also stipulates the requirements for being a qualified franchisee. The Opinion further provides the rights and obligations for franchisor and franchisee respectively, the contents of franchising agreement and the information which shall be disclosed to franchisor by franchisee.
As China still do not have the franchising law, lacking of regulations on franchising has caused many problems in this field. The issuance of the Opinion will serve as an important guideline for gas station franchising activities.
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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.
