While working on an M.B.A. at the University of Calgary in Canada, Meng Sun took a part-time job behind the counter at a McDonald’s. “I thought it was a very good place to start as an aspiring entrepreneur,” Ms. Sun says.
Then, last year, armed with about three million yuan ($360,000) in savings from previous work as a financial consultant, the Chinese national cashed in her degree and fry time to become the first McDonald’s franchisee in China. Now she operates a bustling mall-based restaurant in Tianjin, a city of 10 million people about 70 miles southeast of Beijing.
Ms. Sun, 34 years old, is at the forefront of an emerging race between McDonald’s Corp. and Yum Brands Inc., owner of KFC and other fast-food brands, to recruit and train the best of China’s new entrepreneurial class. The goal is to tap their enthusiasm and capital to boost the number of McDonald’s and KFC outlets in China, just as small-business owners propelled the U.S. fast-food restaurant boom decades ago.
Today, most McDonald’s and KFCs in China are company-owned or operated in joint ventures with local companies. But the number of franchises is expected to grow now that China is set to impose newly standardized franchising regulations next month.
As part of its entry into the World Trade Organization, China will set a framework for everything from the recruitment and vetting of prospective entrepreneurs to the protection of brand and property rights. Previously, Western companies feared they could lose control of their trade secrets and brands by offering franchises in China, which offered them few legal protections. They also had to set up convoluted offshore entities to sell franchise rights. The new rules will change that and also make franchises more enticing to Chinese businesspeople.
“Before, people in China couldn’t imagine being an entrepreneur. They only tried to build large state-owned companies,” Ms. Sun says. “But now, it’s getting better, as people see that even Bill Gates is an entrepreneur.”
For Yum, McDonald’s and other Western fast-food operators, China is one of the few large economies with lots of room to grow. China’s restaurant industry is projected to reach $91 billion in sales this year, nearly double 2001’s $50.5 billion, says the consulting firm Bain & Co. (The U.S. industry is expected to take in about $476 billion this year.) While the U.S. chains face competition from Asia-based chains operating in China, including Shanghai YongHe King Co., controlled by Jollibee Foods Corp. of the Philippines, they see a bright future in the country, where the fast-food industry is widely viewed as being in its infancy.