The Impact of China's Regulatory Regime on Foreign Franchisors' Entry and Expansion Strategies

Since the “open door” policies adopted by China in 1978 ended 30 years of isolation, introduced massive economic and legal reforms, encouraged foreign investment and resurrected private enterprise, China has become the world's second largest and fastest growing economy. In these circumstances, the development of franchising was inevitable. However, in addition to the normal commercial and cultural issues which challenge any franchise system in its international expansion, foreign franchisors proposing to enter China have faced additional regulatory obstacles. Market entry, participation in particular business sectors, and even the use of franchising as a method of business operation and expansion have all raised complex regulatory issues. This paper addresses the liberalisation of market access for foreign franchise systems under China’s World Trade Organisation accession commitments, and the new regulatory regime for franchising in China under the 2007 Commercial Franchise Regulation.