Hong Kong’s legal framework and high per capita income attract foreign franchisors looking to expand to international markets. There were approximately 140 franchised systems in Hong Kong in 2009, predominately in food, retail stores, fitness, children’s services, IT and educational training services. Just fewer than 50 percent are foreign-owned, the majority of which are from the U.S. 35 percent of franchises in Hong Kong are in the food and quick service restaurants category, one third are in services, and the rest are in retail stores.
Most of the local franchisees of U.S. franchises operate as area developers and do not subfranchise. Some do, however, include the Pearl River Delta (PRD) region (immediately to the north of Hong Kong) of Southern China and the Special Administrative Region of Macau as their territory of operation, in addition to Hong Kong. The PRD continues to post strong economic growth, and economic integration between Hong Kong and this region has created a wealthy consumer base with strong franchising potential. With its unique ties to China, Hong Kong franchise consultants often assist franchise owners, both local and foreign, to develop a strategy for expanding operations to this region. It is also common for Hong Kong area developers to partner with the U.S. franchisors to jointly develop franchises in the PRD region and other parts of China, involving equity participation from the U.S. franchisor.
U.S. brands such as 7-eleven, Pizza Hut, Burger King, GNC, and Subway are popular in Hong Kong. American franchisors will, however, find strong competition in Hong Kong due to the maturity of its market and the long establishment of major franchise systems. Successful franchisors are those who understand the need to tailor products and services to local consumer tastes and the need to have a regional presence in Hong Kong to develop local business relationships, be in constant touch with the local franchisee to build the business, and fine tune the product offerings and services.
Quick service restaurants with an entertainment theme, and franchise systems that are related to pets, children and education.
Most franchise growth in the past two years has been in quick service restaurants, nutritional supplements retailing, nail bars, and learning centers. Macau, with its growth of gaming resorts and MICE (meetings, conventions and exhibitions) business faces a shortage of skilled labor in the hospitality industry. There are therefore opportunities for U.S. franchisors in training services to develop franchisees in Macau.
Hong Kong, with its open import market, excellent transportation and business infrastructure, serves as a regional distribution, logistics and marketing hub for many U.S. franchisors to service existing Asia Pacific franchisees. Hong Kong also serves as a regional showcase for U.S. franchisors looking to penetrate the mainland Chinese market and other markets in the region.