The Challenges

There are some major challenges for franchisors when entering emerging market such as China. Firstly, the legal framework in the said countries may be unable or inadequate to protect the intellectual property rights (e.g. brand-name, trademarks, patent, proprietary know-hows) of the franchisors. When someone has pirated the said elements to their own business, it always take lengthy and complicated process for the law enforcement. In some countries, intellectual property laws may not be uniformly enforces on nationwide basis.

Unlike developed market such as USA or Hong Kong, the franchisee or its staff are relatively less knowledgeable and trainable because of the education and relatively lack of quality competence and concepts in emerging markets. This could result in having the product or service being sold deviated from the original standards stipulated by the franchisors. Also, with the relatively lack of business disciplinary and ethics in emerging markets, the franchisee may adopt unauthorized material or business process in order to save cost. The collective non-compliance could result in ruining the brand name or goodwill of the franchisors.

The process for franchisor to recruit a franchisee is not that easy when compared with developed markets. The information transparency for businesses in emerging markets is still very low, making franchisors more difficult to evaluate the capability of prospective franchisees. It will take longer time for the franchisors to check the background, and use more resources in order to undertake due diligence with the prospective franchisees.

The Opportunities

In emerging markets such as China, the number of consumers who can afford and willing to pursuit “more than basic necessities” and “quality of live” are increasing tremendously as a result of rapid economic growth. The demand for products like lifestyle, health, prestigious has continuous growth as a result. Other than pursuit of higher quality products or services, people tends to show-off their wealth or social status through the consumption or buying worldwide famous products. This is a big opportunity for franchisors having worldwide famous brand names entering emerging markets such as China.

Moreover, western brands are highly regarded in emerging markets. Many people have the perception in their mind that western brand products are having higher quality. They are willing to pay extra money as premium in exchange of better quality products as a result of blooming economy. In the view that there are still many barriers for western brands to enter the emerging market, and the lack of channels for people to purchase the said products from overseas, this is another big opportunity for franchisors entering the emerging markets.

Other than in B2B aspects, the demand for quality B2B services is also blooming in emerging markets as China, adhering the higher requirement from the customer and regulatory. Franchisee in aspects like accountancy, advertising, business consulting, education, employment, environmental, event planning, finance, etc., shall have great opportunity in the said market.