Shanghai Daily:

KFC, Yum! Brands Inc’s fried chicken outlet operator, eased franchise limits in China’s second- and third-tier cities for the first time so it can expand aggressively.

KFC said the franchisee fee for interested investors can be as low as two million yuan (US$250,000) depending on location, compared to a minimum of eight million yuan previously.

The largest fast food chain in China with more than 1,700 outlets across the country, said yesterday it will open franchise businesses in all Chinese cities except Beijing, Shanghai, Guangzhou, Shenzhen, Suzhou and Wuxi. In those cities, the company runs restaurants with local partners.

Zhejiang Province is also not open for franchisee business at this stage, the company said in a statement.

These areas were excluded as competition is much fiercer than in small cities and there is little room for further expansion, KFC said.

Dominick Morizio, franchise development director of KFC, said the company has received increasing interest from individual investors for its franchising business. But location limits and capital have dampened expansion.

KFC, which entered the Chinese market in 1987, has restricted the total number of franchised stores below 5 percent. It has only developed the business in some third- and fourth-tier cities in the past few years.

It didn’t open its first franchise in Liyang town of Changzhou in Jiangsu province until 2000.

KFC has 37 franchised outlets to date.

The company didn’t say how many KFC franchised stores it will open this year. Yum!, which also operates Pizza Hut and Taco Bell, said earlier that it will open 375 new restaurants this year on the Chinese mainland.

Major fast food chain operators such as McDonald’s and KFC corporately own and operate almost all restaurants in China to protect trade secrets.

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