With catering brands opening up franchising, the time is ripe for individual investors to enter the catering industry through franchising.
Photo by Fan Jianlei
By WU Rong
In 2023, a formidable wave of franchising hit the Chinese catering market. At the end of September, the number of catering-related enterprises reached 2.5 million, up by half a million from a year previously.
After a wave of franchising, most brands’ models have become relatively mature and the key lies in the supply chain. Cold chain and instant logistics greatly assist operations. Mobile payments and digitization have generated transparency from the cash register to the back-end supply chain.
To attract franchisees, tea shops are lowering the franchise threshold. Bubble tea Auntea Jenny allows the initial fee to be paid in installments over three years, Luckin-wannabe Cotti does not charge fixed fees but shares profits instead. In 2024, these arrangements are set to expand.
Thresholds for top brands are not low. While transitioning from direct operations to open franchising, it is not uncommon to see franchise projects demanding several hundred thousand or even millions of yuan. Most franchisees are willing to come up with 200,000 yuan (US$28,000), but those willing to invest millions are scarce.
The catering industry belongs to the essential consumption sector, and many investors hope to enter this field. And some brands have proclaimed ambitious development goals. Actually, they have the same development goal really: everyone is on the road to 10,000 stores by some specified date in the future. If all the tea, fast-food and snack chains make it to 10,000, there will be little room for any other products in streets or malls.
Behind the expansion lies the problem of management. Brands need to pay attention to training, supervision, food safety and quality control.