Growing appetite for US food franchises in China

China’s rapid economic development, rising middle class, and evolving consumer preferences have created a fertile environment for international food franchises, particularly those originating from the United States, to expand and flourish. The increasing appetite for US food brands in China is a complex phenomenon driven by economic, cultural, and strategic factors. 

1. Rapid Urbanization and Rising Income Levels
Over the past few decades, China has experienced unprecedented urbanization, with millions migrating to cities in search of better opportunities. As urban populations grow, so does disposable income. The Chinese middle class is now estimated to number over 300 million people, with a willingness to spend on dining experiences, leisure, and quality food products. This demographic shift creates a substantial market segment eager for diverse and premium food options - many of which are provided by US food franchises.

2. Growing Middle-Class Consumption Power
With increased income, Chinese consumers now prioritize convenience, quality, and brand recognition. US food franchises, known for their consistent quality and innovative offerings, are attractive options for middle-class consumers seeking dependable dining experiences. The aspirational aspect of American brands also plays a significant role, as owning or experiencing US brands symbolizes modernity and lifestyle aspirations.

3. Changing Tastes and Western Food Preferences
Traditionally, Chinese cuisine dominated the food landscape; however, Western and American food trends are gaining popularity. As younger generations become more globally oriented, they are exposed to Western food through travel, social media, and cultural exchange. This exposure has cultivated a taste for American-style fast food, hamburgers, fried chicken, pizza, and other staples of US food franchises.

4. Emergence of a ‘Western Food Culture
The influence of American pop culture - movies, television, music, and social media - has fostered familiarity and preference for Western lifestyles. US food brands often symbolize modernity, quality, and convenience among Chinese consumers, especially urban youth and expatriates. This cultural affinity enhances the attractiveness of American franchises.

Business Strategy - Market Entry

Franchising offers a cost-effective, scalable, and adaptable approach for US brands to enter China. It is the only “product” that the US can “sell” to China with no tariffs (if products are locally sourced).  It reduces the risks associated with direct ownership by leveraging local expertise in distribution, marketing, and regulation compliance. The franchise model allows the transfer of American culinary concepts while customizing offerings to local tastes.

In China, the franchising model is particularly appealing due to its ability to adapt to regional variations in consumer preferences and regulatory environments. The government has also shown support for franchise development as a means to stimulate economic growth and create employment opportunities. Brands such as Starbucks, McDonald’s, and Nike have established strong markets in China,
illustrating the potential for similar success with other American brands.

Localization:  Successful US food franchises tend to adapt their menus to local tastes - introducing Chinese ingredients, flavours, and dietary preferences - while maintaining core brand identity. This balance between globalization and localization fosters consumer engagement and loyalty.

Using Delivery Apps: The rise of food delivery apps like Meituan and Eleme has transformed the way Chinese consumers access and experience food brands. US franchises that integrate with digital platforms and adopt innovative marketing strategies can further expand their footprint.

Challenges

Regulatory Environment and Competition
While the Chinese market presents vast opportunities, US franchises face hurdles such as regulatory compliance, cultural adaptation, and competition from both domestic and other international brands. It is not a journey that one should foray into China without adequate support from lawyers, accountants or consultants who can help manoeuvre the “Chinese red tape”.  However, the strong demand for Western food and the growing acceptance of American brands continue to incentivize expansion despite these challenges.

Compliance is key
In order to successfully franchise in China, there are a number of compliance items that the franchisor must be aware:

Compliance items

Legal Do's for Franchisors Entering China

1. Do Register the Franchise Agreement
Chinese law requires franchisors to register their franchise agreements with the Ministry of Commerce (MOFCOM) within 15 days after the first franchise contract is signed in China.

2. Do Meet the "Two Stores, One Year" Rule
To franchise legally in China, a franchisor must own and operate at least two company-owned outlets for more than one year (domestically or internationally).

3. Do Provide a Disclosure Document
A Franchise Disclosure Document (FDD) must be provided to the prospective franchisee at least 30 days before signing the agreement. This document must follow Chinese regulations and cover specific financial, legal, and operational information.

4. Do Ensure Your Trademarks Are Registered in China
Register your trademarks with the China National Intellectual Property Administration (CNIPA) to avoid infringement or bad-faith registrations by others.

5. Do Use a Chinese-Language Contract
Chinese courts generally require contracts to be in Chinese (or at least have a Chinese version). Make sure to use a professionally translated and legally vetted version.

6. Do Structure Your Business Entity Properly
Decide whether to enter via a Wholly Foreign-Owned Enterprise (WFOE), Joint Venture (JV), or through a Master Franchise Agreement, based on strategic and regulatory considerations.

7. Do Protect Your Trade Secrets and Know-How
Include non-disclosure, non-compete, and confidentiality clauses in franchise agreements, and ensure compliance with Chinese laws on trade secrets.

8. Do Comply With Data Protection Laws
China's Personal Information Protection Law (PIPL) imposes obligations on companies collecting and processing personal data from Chinese consumers.

Legal Don'ts for Franchisors in China

1. Don’t Ignore Local Laws and Regulations
Don’t assume what works in your home country applies in China. Franchising is regulated differently and non-compliance can result in fines or contract nullification.

2. Don’t Delay Registration with Authorities
Operating a franchise in China without registering the agreement with MOFCOM is illegal and could lead to serious enforcement actions.

3. Don’t Use Unregistered Trademarks
China operates on a first-to-file trademark system. Don’t enter the market without securing your trademarks — otherwise, someone else may legally own them in China.

4. Don’t Rely Solely on Verbal Agreements or Informal Partnerships
Chinese law requires formal, written agreements. Verbal agreements have little to no legal standing in commercial disputes.

5. Don’t Ignore the Importance of Local Legal Counsel
Foreign lawyers cannot practice Chinese law. Always consult with licensed Chinese counsel familiar with franchising.

6. Don’t Underestimate Cultural and Legal Due Diligence on Franchisees
Perform proper background checks on potential franchisees to avoid disputes or reputational damage.

7. Don’t Assume IP Protection Is Automatic
Enforcement of IP rights requires proactive registration and sometimes litigation. Don’t wait until infringement occurs.

8. Don’t Transfer Confidential Business Information Without Legal Safeguards
Ensure your contracts restrict how franchisees can use your proprietary knowledge and include enforceable penalties.

Market Entry Modes Comparison

About the author:

Peter Pang has been assisting franchisors in entering the Chinese market since the early 1990’s. His expertise include franchise law, intellectual property, mergers and acquisitions, employment and labor laws and general corporate law, compliance and governance. Mr. Pang can be reached at info@ipopang.com.

Franchise Expo 2025

AGA will once again be a sponsor of and will be exhibiting at the franchising industry's premier event of the year, which will take place at the Jacob Javits Convention Center in New York City from May 29 - 31. The event attracts over 6000 attendees over three days including entrepreneurs and prospective business owners from all 50 US states and 120 countries who will meet with over 300+ exhibiting franchise brands and industry experts.

Representatives from the Executive Office, along with law and accounting member firms, will host an exhibition booth at the conference to further elevate the Alliance’s global presence in this sector. Additionally, we have secured a sponsorship of a morning 'Masterminds & Mimosas' session, where AGA members—collaborating with industry experts—will lead roundtable discussions. These sessions will provide franchisors with essential legal, financial and marketing guidance to assist with their growth strategies, ensuring they remain informed and compliant. 

Going to be in New York, stop by booth 468 or contact Melloney Pritchard in the first instance. Alternatively visit our Franchising Solutions page to see how we can help you with you global growth journey.

About IPO Pang Xingpu Law Firm:

IPO Pang is Alliott Global Alliance’s representative law firm in Shanghai Province, China and has a strong reputation for its outstanding service delivery of helping many companies across a wide spectrum of industries to establish and grow their operations. Established in the early 1990s, the firm now has associates throughout China and affiliate partners in almost 100 countries. Read more.