China Growth in Food and Beverage Franchises

Opportunities

Most F&B revenue in China is generated by non-franchised establishments, leaving an opportunity for growing franchised brands.
According to the China Chain Store & Franchise Association, China’s food and beverage (F&B) sector reached approximately $595 billion in 2019, a 7.8 percent increase over 2018.
U.S. quick-service restaurant (QSR) franchises in China remain strong but face increased competition from Chinese franchises in such categories as leisure drinks and “hotpot” restaurants serving takeout meals.
Franchisors may find less competition in China’s smaller and less developed Tier 3 and Tier 4 cities.
The graph below compares the growth rate of new franchise stores between the larger and smaller cities in China. The stories are grouped by category: formal dining, leisure drinks, local-flavor snacks, hotpot and BBQ, Bakeries and desserts, fast food, and leisure snacks.
Annual Increase in New Franchised Stores in China: 2018-2019

Economic Slow Down: The F&B restaurant sector is one of the industries hardest-hit by the COVID-19 pandemic. Almost all restaurants experienced a sharp revenue decrease in the first quarter of 2020.
Local Franchise Chains: Chinese brands have taken the majority of the market in the Leisure Drinks, Local-flavor Snacks, and Hotpot & BBQ subsectors.

Bakeries and Desserts: Opportunities exist for U.S. bakery and dessert concepts, including breads, cakes, and sandwiches, in China’s Tier 3 and Tier 4 cities.

Major Companies: Local and regional products and franchise brands gaining popularity in China.

Leading Consumer Rating Apps: Chinese-language Android/iPhone apps that review restaurants.

Key Organizations: Chinese business associations.

Major Trade Shows: Events listed are supported by the U.S. Commercial Service China Office.

05/15/2020