Content Outline
With franchise companies taking the lead, they are now what new entrepreneurs look out for as the entry point into business ownership. With investors franchise businesses are set to have a proven business model which they can utilize and give a considerable success rate to their long-term achievements. The major advantage of opening a franchise business in Hong Kong is that of a relatively smooth process of the birth of a company and management model, and most importantly, there is the support from the company framework which is already there.
Hong Kong offers with its high per capita income and a legal system, several foreign franchisors to start their sub-franchise in the city. In reality, Hong Kong is a franchise-friendly city that has no restrictions on foreign investment, no regulations on franchising operations, and no requirements of local management participation and foreign equity participation. However, moving on to the actual topic, “What is a Franchisee?”, you need to know how it can contribute in turning your venture into a highly successful business.
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The Franchisee And The Franchisor
Franchising is a business model that brings mutual benefits to franchisors, who are selling already proven and tested business plans, and to franchisees, who are attracted to buy it. This is an opportunity that allows the shareholder company to enter different but related business sectors in a very attractive Hong Kong market.
A franchising contract is an arrangement between the franchisor, who either owns or runs the business and grants the license for another party (franchisee) to use its services and products, for the same to internalize it into an affiliate. However, both the owner and the business have to follow the according rules while a franchise business in Hong Kong is started.
Franchising In Hong Kong
International brands frequently see Hong Kong as their regional central point of their franchising activities, with the declared global franchise brand brands names available, these brands being such as Pizza Hut, McDonald’s, Starbucks, 7-Eleven, KFC and Subway, having a foothold in Hong Kong. According to the statistics of the Hong Kong Franchise Association of Hong Kong, virtually 20% of the franchised business in Hong Kong are in retailing, whereas 43% are in catering business and the rest 37% are of some other services in Hong Kong.
Franchising entails a simple and flexible business model for companies operating in Hong Kong. It is one of the most comfortable ways of business as it comes with many benefits to its investors.
This approach is about promoting the services sectors in the developed industry of Hong Kong, namely; the beverages and food sector, the service industry, convenience stores, fashion stores, travel agencies, and the education sector which is linked to training.
In fact, Hong Kong holds an advantage for regional franchising industry, for instance, its first-rate services covering the industry, experienced talents, potential franchisees, a leading showcase, a history of organizing exhibitions, broad Asian business networking, and market intuition.
The Advantages of Franchising In Franchising In Hong Kong
It is no wonder then that a lot of people who have been thinking about taking the reins on their own business now are even considering opening a franchise business in Hong Kong, as it has plenty of benefits that can help them succeed in this industry.
The first advantage that a business derives from the franchise operation is already existing services or products. Another advantage of franchise business to standard start-up business is that the business with these types will have high success rate compared to the latter, since some of the possible mistakes in operating the company would have already been ironed out.
Brand name is the other very important benefit to franchise. From international level to the domestic level, or somewhere between, the brand of a franchise will always be an edge you use before and after you invest in a franchisee.
The franchisee will get the opportunity to interact with the company not only in terms of business know-how, but also to give training on the special running of the business model. Such networking will also be an added benefit as it provides support and guidance generally in the early stages of opening a retail outlet.
Steps Of Operating A Franchised Business In Hong Kong
The initial stage of franchising in Hong Kong is to discover the sectors in Hong Kong where people are successful in their trade under franchisor labels. The investors can also decide to start their restaurants in Hong Kong since the selection of franchises is also part of the application.
Everything comes at a price, and investors will always be reminded to be thorough and do comprehensive market analysis, irrespective of the sector. When a chosen franchise has been selected, both parties will be compelled to follow the specifications and conditions of the Franchise Agreement.
Besides that, the business should be ready for the upfront fee and an additional percentage of profit. In Hong Kong, most of the franchisors are registered as limited companies so you will easily be incorporated after the processes necessary for your company formation and registration.
Franchise Agreement
The franchise business is based on an agreement that identifies an operation model. A franchise contract is executed between a company (franchisor) that owns the brand and a company (franchisee) that implements the business model and thus uses the brand of the franchisor. In an agreement, each party will adhere to its legal standards, which will meet some operational needs. The key components will be as follows:
- The franchise pays a fixed amount to the franchisor.
- In between, the franchiser monitors and supervises the franchisee’s business.
- A franchisor will let the franchise use its name or brand.
- The franchisor supports franchisees in different areas.
Regulation Of Franchising System In Hong Kong
In Hong Kong, there is no particular legislation or regime that manages the sale of franchises. On the other hand, other laws also have application to the agreements that control the business entities. There are no franchise-specific restrictions for those who wish to operate locally or come from another country. That is, those who wish to set up a franchise in Hong Kong.
A further feature composing Hong Kong’s economic system is that capital is not subject to any restriction on flows in or out of Hong Kong. Foreign investors have the right to assign development and master franchise rights to their local partners. Foreign entities are also able to invest in real equity and real estate properties of the local business.
Hong Kong has a simple taxation system. The franchise is obliged to pay a business tax on its earnings that originated in Hong Kong. Interestingly, there is no taxation of capital gains, services, dividends, and goods. Nevertheless, the ‘withholding tax’ is an instance of the taxing of income derived from intellectual property rights in Hong Kong.
The Franchise Ordinance is highly appreciable for those business owners who want to own a franchise in Hong Kong, as they are compulsory to the steps of well protecting the intellectual property of the franchise. As Hong Kong does not apply a global policy on franchising, franchises operating in the country are granted the right to purchase or sell local goods as long as these actions are compliant with the competition law in Hong Kong.
Conclusion
Hong Kong which has a reputation of the city that grows and influences the services industry in the whole world is a reliable avenue for entrepreneurs who want to invest in a franchise. Nevertheless, you have to make sure to do your homework on the business and market before you make a decision to enter a franchising agreement in this dynamic space.
There are multiple sectors that have benefited from the franchising business model in Hong Kong, such as food and beverages, fast-food, catering, retailing as well as convenience stores. It is crucial that you will take time to find out the best way to invest your money and time in this city if you are considering company formation here.
FastLane is the trusted partner for the convenient business registration and incorporation of your franchise in Hong Kong. By leveraging their experience and range of services, you will be able to handle the complexities of launching your business with confidence, which is essential in the competitive Hong Kong market. Contact us now.