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CI_JulAug04 - China Insights Vol 1 July-August 2004...

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Benesch, Friedlander, Coplan & Aronoff LLP China Insights Vol. 1, July-August 2004 In This Issue… Franchising in China China Franchising – The New Frontier Chinese Regulation of Franchising How We Work With Clients Franchising in China The following graph says it all in terms of the potential opportunity for businesses in the U.S. and other developed countries to expand their sales by franchising in China. Tom Brule is a nationally recognized expert in the franchising field and leads Benesch’s franchising practice. Guest contributors, Steve Zhu and Ke Chen, are lawyers with the prestigious Shanghai- headquartered Allbright Law Offices. Benesch and Allbright regularly work together on behalf of U.S. clients. In this issue of China Insights, we are presenting selected information and perspectives about franchising in China. --Allan Goldner, Chair of Benesch’s China Group The China Franchising Opportunity 2% Estimated Actual Current U.S. & Other Developed Franchise Sales Estimated Actual Current China Franchising Sales Estimated Potential Opportunity For Expanded China Franchise Sales Percentage of Retail Sales Conducted Through Franchising Cleveland: 2300 BP Tower 200 Public Square Cleveland, OH 44114-2378 Phone: 216.363.4500 Fax: 216.363.4588 Columbus: 88 East Broad Street Suite 900 Columbus, OH 43215-3506 Phone: 614.223.9300 Fax: 614.223.9330 www.bfca.com 45% 40% 35% 30% 25% 20% 15% 10% 5% 0%
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change in China. The juxtaposition of the Colonel with Mao has helped feed China’s surge into the 21st century. There is little doubt that China is still an intriguing market. With over 1.3 billion mainland customers, China offers some of the best growth opportunity for any company with the resources and skills to explore and grow with it. However, like with all matters, it is critical to do busi- ness in foreign markets methodically in order to increase your chances of success. Even KFC stumbled with its trademark “Finger Lickin’ Good”, which translates in Chinese to “Eat Your Fingers Off”. How-To Guide. Certainly one of the best methodologies to enter China is by having the necessary resources to open the first store as a corporate store. By using a “cor- porate” store, you are able to secure better protections and work out the vagaries of local tastes and needs prior to franchising. As with all development, it is best to lay a solid foundation prior to expanding. China, as a foreign country, has its own unique ways of doing business. The long accepted Chinese term “guanxi” is an ancient and well-accepted manner of establishing personal relationships in China. Regional Preferences – Local Familiarity. A major consideration in franchising in China is not to view China as a single market. Just as there are nuances in the market between Atlanta and Seattle, so there are differences in the markets of Shanghai and Beijing which must be taken into account. In fact, due to cus- toms and languages, the differences are far greater.
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