Warm reception for cool brands

By Shen Jingting (China Daily)
Updated: 2010-04-19 08:06

Visitors taste ice cream at a franchise exhibition in Beijing on Sunday. [Wang Jing / China Daily]

Paolo Bellamoli had one of the coolest products on display at the three-day China Franchise Expo, which ran from Friday to Sunday in Beijing's China World Trade Center.

"You see, people are waiting in lines for my ice cream," he said. "Chinese people really like it!"

Bellamoli, general manager of Yogorino, an Italian ice cream company, was in good spirits as he handed out free samples of several flavors to the passing crowds.

It was Bellamoli's first time in China and he, like many at the expo, was hoping to find partners interested in opening branches on the mainland, where many consumers have not had the chance to taste genuine hand-made Italian ice cream.

"Our first direct franchise in Beijing is supposed to open in the Silk Street in May but we expect more chain stores in China," he said.

John Ho, director of the exhibition and conference department of the China Chain Store and Franchise Association (CCFA), said more and more international brands were looking for a presence in China.

The CCFA was the main organizer of the China Franchise Expo, the largest franchise exhibition in the country and an annual fixture since 1998.

"We have more than 200 exhibitors this time, the highest number in history," Ho told METRO. "Among them, 30 percent are from foreign countries."

Some of the exhibitors were championing more than one brand or product, Ho said. Some were sharing information about dozens of foreign franchises.

"Brands from Russia, Sweden and Latvia are attending the expo for the first time," Ho said. "They feel optimistic about China because the Chinese market is the only one that is still growing despite the global financial downturn."

According to Ho, international brands in China tend to fall into two categories - brands that have had a presence in the market for years such as KFC - and brands that do not yet have a toehold.

"Unlike the first category, which offers opportunities for a single-store franchiser and which asks for specific investment money, the latter are usually looking for a master franchiser, or a franchiser who will be able to take care of business on a regional scale," Ho said.

Many Beijingers expressed an interest in buying into a foreign company.

"Hundreds of people came to see us for counseling services and we almost ran out of handouts," said Qian Xingwei, assistant manager of Coldwell Banker, one of the largest property agencies in the US.

Qian said his company offers services for pre-owned homes from 102 outlets in Shanghai, Chongqing and Zhejiang. The number is set to rise across China to 250 by 2011.

Fan Sizhe, 42, a Beijing construction materials dealer attended the expo and was among people hoping to open a KFC franchise.

"I would like to invest in another industry that may diversify some investment risk," he said. "Brands like KFC have a good reputation and the company owns resources we can easily access and share."

The threshold for a Chinese KFC franchiser is 2 million yuan. Fan said money was not a problem and he plans to set aside 5 million yuan for his new business.

"They (KFC) told me the average return on investment was 30 percent per year, which means people may retrieve their money in three years," Fan said.

In the latest report issued by the CCFA, the top 120 franchise companies in China now have an average of 973 outlets each, up 15 percent on 2008.

The top 120 franchise companies realized total revenue of 408.6 billion yuan in 2009. Single-store revenue fell by 230,000 yuan year-on-year to 2.67 million yuan. The rising cost of store rentals was the major reason.

Among the top 120 franchise companies, 14 are owned by overseas companies. The top performer in the dining category, KFC, enjoyed sales of 28.8 billion yuan in 2009.