Family in crisis: Mistrust reigns as FamilyMart contracts up for review

Following the exit of senior staff, FamilyMart cannot keep pace with Lawson.

By LIU Yujing


In China’s streets malls and stations, the ubiquitous convenience store FamilyMart has been overtaken by Lawson for the first time. FamilyMart China, with 2,967 stores, now trails Lawson, with its 3,256 stores.

Complicated relations

In a staff shakeup, the general manager of FamilyMart China ZHU Hongtao resigned in October last year, and at the end of June this year, CEO LIN Jianhong also jumped ship. At the same time, Lawson has significantly accelerated, turning a profit for the first time last year.

ZHANG Sheng, the vice president of Lawson China, said that about 1,100 new stores will be opened this year and Lawson will expand into one or two new provinces, maintaining growth at around 35 percent. Lawson expects to have more than 10,000 stores in China by 2025. FamilyMart is currently growing at about 15 percent each year, far behind all serious competitors.

In 2004, a Sino-foreign joint venture, Shanghai Fumanjia Convenience Co, opened the first FamilyMart in Shanghai and it quickly became the leading Japanese convenience store in mainland China. Until 2019, the company maintained a fairly high rate of regional expansion, especially in East China, with Shanghai at the core. Shanghai achieved profitability in 2008, while Lawson did not make a profit until last year, its 25th year in China.

FamilyMart China (FMC) is now licensed to Ting Hsin International Group. Ting Hsin pays two fees to FamilyMart Japan (FMJ) for opening a store in China: a brand fee regardless of profitability, and a profit share. Ting Hsin’s wholly-owned subsidiary Tingyi (Cayman Islands) owns 59.65 percent of FamilyMart China. Taiwan FamilyMart owns 18.3 percent, and FamilyMart Japan, as a joint venture partner of another shareholder FMCH, owns approximately 22 percent.

Renewing their vows

In 2019, the family fell out. FamilyMart Japan and FamilyMart China went to court, and a huge can of worms was kicked over. The financial opacity of FMC has makes it impossible, FM claimed, to understand the true business situation in mainland China: a state of affairs described mildly as “uneven profit distribution.”

FMJ lost, and nothing was resolved. FMC denies everything. The deterioration of their relationship directly restricted growth.

Convenience store brand authorization of FamilyMart has a limit, generally 20 years, and the contract is about to expire. What happens next, is anyone’s guess.

There are considerable differences between what Ting Hsin and FamilyMart Japan want. There are obvious doubts over expansion. The franchising model is under question. Lawson and 7-Eleven cooperate with local companies, which Ting Hsin doesn’t. This means entering new regions is costlier and is riskier for FamilyMart

FamilyMart has the highest franchising ratio among Japanese convenience stores at 80 percent. Lawson and 7-Eleven are both below 50 percent. The high ratio brings problems such as quality control. Franchisees may avoid scrap to control costs.

Friends over family

Despite the crisis, FamilyMart still has considerable brand recognition and store size in mainland China, which still gets them into the most popular business districts.

FamilyMart’s own products account for 40 percent of sales, improving brand differentiation and customer stickiness, and are quite profitable. Own brands account for only 5 percent of sales over all of China’s convenience stores, far below the 30 percent found in Japan.