In China to carry out franchising business for seven years, KFC yesterday for the first time to lower the threshold, the franchise fee to a minimum of 2 million yuan, while expanding the franchise geographic scope.
Second-tier cities allowed to open up for franchising
KFC's parent company, China Yum Brands, revealed yesterday that since KFC opened up its franchise business in the Chinese market in 1999, it has only prioritized the opening up of restaurants in third- and fourth-tier cities with strong momentum as franchise options, and that the purchase fee for franchising a restaurant, though varying somewhat according to the actual situation, has been kept at 8 million RMB The company's purchase fee has been maintained at around 8 million RMB, although it varies according to the actual situation.
It is reported that in the future, KFC will geographically expand the range of franchise options, in addition to Beijing, Shanghai, Guangzhou, Shenzhen and other first-tier cities and joint ventures such as Suzhou, Wuxi and the province of Zhejiang is temporarily not open to franchising business, the rest of all the second and third-tier cities will be open to franchising. In addition to increasing the number of stores available for franchising, KFC will also have a wider range of options in terms of pricing. The purchase fee for a KFC restaurant will be as low as possibly around 2 million yuan for some restaurants, but the franchise period will still be at least 10 years.
KFC to open up store finances
In order to attract investors to join, KFC will open up its store financial statements and charge a franchise fee based on the operating income of existing stores.
Tang Damo, director of franchise development at Yum Brands China, said the franchise fee, whether 8 million or 2 million yuan, refers to the reference price for purchasing a mature, operating KFC restaurant based on a number of composite indices, including all the decorations in the restaurant, the supporting equipment and facilities, and the trained restaurant management staff. The actual transfer fee of the target restaurant is not fixed, but should depend on its business conditions, location of the business district and the size of the restaurant. Franchisees can choose the business opportunity that suits them based on their own financial conditions and judgment.
For the payback period and in the mainland market whether the proportion of franchises has been maintained within 5%, KFC senior figures did not make an answer, but made it clear that the investment recovery and the franchisee's business strategy and management level has a very close causal relationship, if the operation is not good, KFC will not have a buyback program.
Reference: Morning Post 2006-04-20