China has been a gold mine for U.S. brands, especially well-known restaurant brands seeking to cash in on the growing prosperity and buying power of China’s growing middle class, and its desire to consume “Western” products. In recent years, major U.S. brands have been racing to expand their business in China, from automobiles to cheeseburgers, tacos, pizza, and fried chicken. However, despite the opportunities, operating a franchise overseas also comes with a unique set of obstacles.
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Overview of the international franchising
As the U.S and European economy have been slowed, many franchisors began to search for growth opportunities overseas. Indeed, with consumers reducing their spending, it became quite hard to expand the business staying in their country. For example, in 2009, the total number of U.S. restaurants fell by 0.3 percent and customer traffic dropped 3 percent, according to consumer market research firm NPD.
To create a franchise has the benefit to offer franchisors a new expansion and for franchisees a support to develop their business. Internationally, the general trend toward globalization has played a role in fueling overseas franchise growth in both directions. Not only have U.S brands become more commonly known and desired but the franchise business model has become more widely understand and acceptable as a vehicle for business success.
If you want to run a franchise business in China, you need to know well about China and its consumers.
New Chinese consumers need new approach
Franchisors see opportunities abound as profits from overseas operations have been growing faster. Beside a great unit growth in China, it is offering a favorable exchange rates.
More important, the country’s economic growth has helped a lot of people to become wealthier, who we called the growing middle class. The previous generation (people who were roughly born before 80th) used to work a lot to ensure a saving for their children. Nowadays, Chinese people are more willing to pay for 2 reasons. First is that they have less financial pressure than their parents and the second is simply because they want to. The Chinese Millennial generation is different, having some common features.
- They are audacious : they believe that everything is possible if they make efforts. They also want to change and become better.
- They are adventurous : they want to try even they are not experimented as they are still young. That’s why a lot of young Chinese people want to go in big cities and develop their career.
- They are open-minded : As they have to face a different environment, different people and culture, they have to be in some ways more open. The globalization has brought many new things in China, to which they must adapt. Moreover, the growing number of Chinese people making international travel has contributed to change Chinese consumers’ desire/taste and the landscape of China’s market.
- They are big spenders : They know that to earn money, you have also to invest. The term “investment” can be apply not only in business, but also in one’s own. To invest time and energy on beauty (appearance is quite important in China, because it represents sometimes an added value), on health and sport, on learning a skill, … Whether it is for future benefits or just meet a hobby, these things which weren’t part of Chinese people’s interest become now much more important.
- They are very connected : Chinese people are nowadays the must connected in the world. The society is completely digitalized, letting them spend a lot of time online. A new information, a new brand, product can be known very quickly over the Chinese network.
Of course, we can’t say that everyone is the same, but these are what we can observe and distinguish as the main Chinese consumer’s behaviors.
In that way, you have to consider that Chinese people today are very demanding consumers. They are informed and will not purchase only because you have the “foreign brand” label (even if this represents an added value).
These new active people, covering and leading the Chinese market, also transforms the way to do business in China. That’s also why businesses in China grow or fell faster than in other places. New companies or brands can make profits very soon but the country is also developing at a rapid pace and brands have to be up-to-date, follow trends in order to ensure their competitiveness.
Adapt a great product or Service
We just talk about consumer’s behaviors, we also have to include the different tastes, dietary restrictions, and the language barrier. Chinese may like “western products” but they also like green tea, dumplings, rice and so many Chinese foods. Even McDonald adapts its menu in China with taro pie, Matcha latte, dough sticks and Soy milk (Traditional Chinese breakfast) etc.
Without a great product or service, nothing else works for very long. To trigger the desired customer response—”This is great!”—set excellence as your mini-mum standard of quality both in what you deliver and in the way you deliver it.
What I mean is that, at the same time you bring some imported foods, it is important to analyze first the Chinese market and to meet with its consumer’s preferences. For franchisors and franchisees, that means food brands For franchisors and franchisees, that means food brands, for example, must balance their traditional menu offerings. It’s also a way to show that you care about their need.
You need to find a local partner
For individuals, adapting to a new country often is fraught with difficulties, both expected and unexpected. There are different laws, different way to do business (officially and informality speaking). In China, “Guanxi” which means “contact” or “relation” is very important to find partners, contracts and solutions. If you speak Chinese, that’s even more helpful.
GMA can help you develop your business in China. We have been developing many successful businesses in China because we know well the market, its trends and how to effectively promote in China, using the latest digital tools.
You have an idea and want to discuss further ? Do not hesitate to contact our experts. It is always a pleasure to innovate and grow in this promising market. You can also leave a comment below or check our services first.
“In China, nothing is easy, but everything is possible.”
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