Key numbers for franchising in China
- RMB 41.2T
- China retail sales, Jan–Oct 2025
- RMB 2.13T
- CCFA Top 100 chain sales, 2024
- 53,782
- New foreign-invested enterprises, Jan–Oct 2025
- 2+1
- Direct-owned outlets required before franchising
China remains one of the world’s most active franchising markets, with a mature regulatory framework and deep consumer demand across retail, food service, and lifestyle brands.
Franchising first appeared in China in 1987 when KFC opened in Beijing. At the time, modern retail infrastructure and franchise law were still taking shape. Today, foreign franchisors enter a market with established disclosure rules, commerce-authority filings, and a dense network of chain and franchise operators across tier-one cities and lower-tier markets.
Modern Day Chinese Franchise Market
China’s franchise and chain retail sector has continued to scale. According to the China Chain Store & Franchise Association (CCFA), the country’s Top 100 chain enterprises recorded RMB 2.13 trillion in sales in 2024, with more than 257,000 stores—up 4.9% and 13.5% respectively from the prior year’s Top 100. Retail sales more broadly reached RMB 41.2 trillion in the first ten months of 2025, while new foreign-invested enterprise registrations rose to 53,782 in the same period, up 14.7% year-on-year.
For international brands, that combination—large consumer demand, growing chain density, and renewed inbound investment—keeps franchising a practical market-entry path alongside direct investment and joint ventures.
Popular Franchising Trends in China
Even as global markets face slower growth, China’s franchise formats continue to adapt. Expansion is no longer concentrated only in Beijing and Shanghai: second- and third-tier cities remain important for restaurants, convenience retail, and consumer services.
Digital channels shape how franchises operate and market themselves. Online grocery, delivery platforms, and O2O (online-to-offline) models influence store design, inventory, and local marketing. Foreign franchisors increasingly look for partners who can execute both physical rollout and digital customer acquisition.
Format trends favour coffee and quick-service restaurants, health and wellness concepts, specialty retail, and service brands that can standardise training and quality across multi-city networks. Brands that combine a clear operating system with flexible local marketing tend to scale more cleanly.
Considerations of Franchising in China
Franchising lets a brand owner grant outside parties the right to use its brand, products, logos, intellectual property, and know-how to sell goods or services in exchange for fees, royalties, or other compensation.
The main advantage for franchisees is a ready-made business with brand recognition and an operating system. For franchisors, the model supports overseas expansion without building every outlet themselves.
The main disadvantage is reduced day-to-day control. The wrong local partner can damage brand reputation quickly. That risk is inherent to franchising worldwide, not unique to China—but it makes partner selection, disclosure quality, and contract enforcement especially important in a large, multi-city market.
Starting a Franchise in China
If you are a franchisor looking to build a franchise network in China, you must meet the qualifications in the Commercial Franchise Administration Regulation (2007). Three of the main requirements are:
- Only enterprises with a mature business model can become franchisors. You need evidence of a solid model and the ability to provide long-term business guidance, training, and support.
- Your enterprise must satisfy the “2+1” rule: at least two directly owned businesses operated for at least one year, in any part of the world.
- Franchise systems are subject to disclosure and network-based record filing. The franchisor must file records with the appropriate Chinese commerce authority within 15 days of signing an agreement with a franchisee.
China Franchising Laws
China first introduced franchise rules in 1997, when much of the industry still sat in grey areas. Clearer drafts followed in 2005, and a fuller framework was set out in 2007, building on the 2005 measures.
The 2007 Commercial Franchise Administration Regulation remains the core national framework for franchisor qualifications, information disclosure, and commercial franchise record filing. Earlier foreign-investment restrictions that once constrained franchising have largely been replaced by this disclosure-and-filing regime, though sector-specific licences for stores and products still apply.
Laws About Franchisor and Franchisee Relations in China
Franchise relationships are also governed by contract law. Regulations and administrative measures that commonly apply to franchise relationships in China include:
- The Commercial Franchise Administration Regulation
- The Commercial Franchise Registration Administrative Measures
- The Commercial Franchise Information Disclosure Administrative Measures
- The Administrative Measures for Foreign Investment in Capital Fields
Understanding Franchise Contracts and Agreements in China
Contracts and agreements define the relationship between franchisor and franchisee. Both sides need clear terms on fees, territory, support, brand standards, and exit.
There is no single mandatory contract template, but the parties must agree terms that work for both. Contract duration should generally be no less than three years unless the franchisee agrees to a shorter term.
Typical stipulations include:
- Basic information on both the franchisor and the franchisee.
- The duration of the franchise contract.
- Payment details such as fees, commissions, and royalties.
- Operational guidance, support, training, and related obligations.
- Brand standards and quality requirements the franchisee must uphold.
- Customer rights and how compensation or liabilities to customers are handled.
- Amendment, rescission, and franchise termination terms.
- Liabilities for breach of contract.
- Dispute resolution methods.
- Any other matters either party needs to address.
Franchising remains an attractive market-entry strategy for foreign brands when the operating model is proven, disclosure and filing are handled correctly, and local partners are selected carefully.
As China’s economy continues to shift toward consumer-driven growth, Acadia Advisory can support your China market entry through the franchise model—from structuring and filings through practical rollout alongside your legal counsel.
Frequently Asked Questions
- What qualifications must a foreign franchisor meet under the 2007 Commercial Franchise Administration Regulation?
- A franchisor must operate a mature business model and be able to provide long-term operational guidance, training, and support to franchisees. It must also satisfy the “2+1” rule: at least two directly owned outlets operated for at least one year, anywhere in the world. After signing a franchise agreement, the franchisor must complete commercial franchise record filing with the competent commerce authority within 15 days.
- What is the “2+1” rule and how is it enforced?
- The “2+1” rule requires a franchisor to have operated at least two directly owned businesses for at least one year before offering franchises in China. The outlets do not need to be in China. Commerce authorities typically verify this through disclosure materials and supporting evidence during franchise record filing. Brands that cannot demonstrate compliance often face filing delays or rejection until the requirement is met.
- What are the franchise disclosure and record-filing requirements?
- Before a franchisee signs, the franchisor must disclose prescribed information about the franchise system, fees, litigation history, and operating support. After the first franchise agreement is signed, the franchisor must file franchise records with the appropriate Chinese commerce authority within 15 days. Ongoing disclosure and filing updates apply as the network expands. Chinese-language materials and complete supporting documents are expected in practice.
- Can a foreign brand franchise in China without establishing a local entity first?
- In many cases yes, particularly through a master franchise or area-development structure with a Chinese or foreign-invested partner that holds the local operating rights. Entity choice depends on brand control, IP licensing, tax, and rollout model. Direct multi-unit expansion often still requires a China company for store operations, employment, and sector licences even when the franchisor itself remains offshore. Structure should be confirmed against current MOFCOM and local practice before marketing franchises.
- What is the minimum franchise contract term in China?
- Commercial franchise contracts should generally run for at least three years, unless the franchisee expressly agrees to a shorter term. The agreement should also cover fees and royalties, territory, operational support and training, brand standards, customer liability, amendment and termination, breach remedies, and dispute resolution.
- How does commercial franchise registration differ from a standard retail business licence?
- A retail business licence (and related branch, fire-safety, and product permits) authorises a company to operate stores and sell goods. Commercial franchise record filing is a separate MOFCOM/commerce-authority process that applies when a franchisor grants others the right to use its brand, operating system, and know-how for fees. Franchise filing does not replace store-level retail approvals, and a retail licence alone does not satisfy franchise disclosure and filing duties.
Discuss your franchising in China requirements
Share your brand, target cities, and partnership model-we will outline structuring options, regulatory steps, and how our team can support rollout alongside your legal counsel.