Market Intelligence
Franchising Bakeries Confectionary Products China

China Growth in Food and Beverage Franchises

U.S. quick-service restaurant (QSR) franchises, especially in the baked goods sector, may have strong growth opportunities in China’s Tier 3 and Tier 4 cities.

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

Graph of increase in number of franchise stores in China 2018-2019
Growth Rate Comparison Between Tier 1 & 2 and Tier 3 & 4 Cities

Challenges

  • 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.

Best Prospects: 

  • 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.

Additional Resources: 

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. 

Contact Us:  

RetailandFranchising.China@trade.gov

05/15/2020