Chinese foodservice – Part 2: Franchise models are helping chain restaurant brands to further grow

Currently, about 75% of restaurant outlets in China are in formats that are highly standardized and scalable, according to the China Chain Store & Franchise Association, meaning they follow a consistent model that can be easily replicated. Because of this high level of standardization, we expect chain businesses to expand more rapidly in China’s foodservice market in the coming years, especially in lower-tier cities, to reach a market share of around 40% to 50%. This is similar to what we see in more developed markets around the world.

The modern franchise model fosters a cooperative relationship between brands and franchisees, and it is crucial to the growth of chain businesses. Industry-wide advances in digitalization and supply chain management make it easier than ever to implement a franchise model, and we anticipate that more investment will be directed toward supply chain infrastructure and digitalization across China’s foodservice industry in the coming years.

However, as the franchise model becomes more popular among restaurant brands, we foresee increased demand and competition for high-quality franchisees. To achieve national expansion and form mutually beneficial relationships with franchisees, companies must possess high brand equity, robust in-house supply chain and digital capabilities, or strong management skills.