U.S. consumer brands from fast food to fitness clubs are speeding up expansion into China, eager for a share of the huge consumption potential brought by the ongoing economic transition.
"I firmly believe China, the world's second largest economy, has huge potential for a franchise industry in consumer brands as people's incomes continue to rise and more and more ordinary Chinese consumers are looking for a broader array of high-quality products and services across the country," said Val Huston, principal commercial officer with the U.S. Embassy in China on Monday during a promotional event for U.S. brands seeking franchising opportunities in China.
Retail franchising is a promising industry that creates jobs and stimulates investment, Huston said.
The U.S. International Franchise Association estimates that retail franchising generates 2.1 trillion U.S. dollars for the U.S. economy and provides 18 million jobs. Franchising in China employs around 10 million, according to the China Chain Store & Franchise Association.
"We see China as one of the most important markets in the world and we are here now for long-term partnership because China's economic shift from being manufacturing-driven to consumption-based offers huge potential," said David Abraham, vice president of Roark Capital Group, an American private equity firm investing in food, retail and healthcare.
Wingstop, a chain of chicken wing restaurants and sandwich brand Arby's have found that young Chinese consumers want high-quality food that is different from that which they are used to. Another U.S. fast food restaurant Carl's Jr. saw its outlets in Shanghai achieving strong average unit volumes of about eight million U.S. dollars last year and has a long term plan to open 1,000 restaurants in China.
As markets expand in China, U.S. brands are planning assaults across the board. The world's largest gym chain Anytime Fitness sees China's fitness market as under-developed. Less than one percent of Chinese people go to fitness clubs, compared with three percent in Japan and 15-20 percent in the United States.
"We view China with a long-term perspective as market growth can continue for many decades," said international development vice president John Kersh with Anytime Fitness, whose Xi'an branch posted record numbers last year.
Accessing a new market is not easy. Finding locations, partners and suppliers; localizing products and services; all take time and effort, said Nicholas Boudet, president of Focus Brands International, an Atlanta food franchise service provider with over 1,400 restaurants in 65 countries outside the U.S. market.
"But overall, there are more commonalities than differences around the world in the food market, and we will keep on adapting our concept of Chinese consumers, such as the growing trend of online-to-offline food services," Boudet added.
