Is Franchising Still Feasible in China?
Recently, we’ve been working with one of our clients on how to make licensing and franchising sexy again in China. We are fundamentally reimagining what licensing & franchising means today.
The original models of licensing, franchising & distribution don’t work anymore. Often, people end up unhappy because they enter into a fixed structure & when you let someone squat on your IP in China it’s very hard to get out from under that. I don’t recommend it.
But, when you look at newer models they’re much more open and flexible. They might be exclusive, but they allow ways to get out of the situation if it goes awry, or if you simply outgrow the partner. You must be adaptive so that you can constantly absorb change. This is obviously easier said than done. Most companies have rigid legal structures, contract systems, etc. And I think for China most of those don’t work. The market is way too fluid.
Bottom line…don’t ever authorize anyone in China to control your company through a restrictive exclusive or semi-exclusive deal. Why do a margin share when you could do a service agreement? Why do either of those when you could do a joint venture and get them to put in half the money? Think creatively, protect your interests, and plan for flexibility.
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