Hi

I've searched through quite a few threads but can't find the specific advice I need.

I want to set up a shop in the French Concession. About 30 sqm of trading space with a bit of back-of-house space. What would be the rent on such a space? Can anyone recommend a real-estate agency with good customer service that specialises in this?

What licence do I need? How much?

I'd be grateful for any advice from people who have tried this before. Good/bad experiences, unexpected problems, tax issues, dealing with bureaucracy, anything really.

Thanks in advance

Bob

Are you for real?
There are heaps of threads on setting up a business here, and the overwhelming advice is:

DONT

Not easy at all unless you have serious capital, and irresistable product, and plan to make a load money. There are a lot of details that go with what particular industry your business in, how much registered capital ( look up this term), and how many employees. Having store front space downtown is bound to be expensive, so you need a business that can knock of 20 or 40 or 100K gross profit a month ( depending on where you locate ) just to cover the rent and-or have some significant cash in the bank to see it through until it does. Not saying its not doable. try to Path to China or one of those places.

shanghaiwood wrote:Hi
I've searched through quite a few threads but can't find the specific advice I need.
I want to set up a shop in the French Concession. About 30 sqm of trading space with a bit of back-of-house space. What would be the rent on such a space? Can anyone recommend a real-estate agency with good customer service that specialises in this?
What licence do I need? How much?
I'd be grateful for any advice from people who have tried this before. Good/bad experiences, unexpected problems, tax issues, dealing with bureaucracy, anything really.
Thanks in advance
Bob

A fool and his money are easily parted, and no sooner the truth than in China. Bob if you can read. write and speak fluent Chinese, you might have slim chance for business success. Even then with such skills you will be an outsider unless you look Asian/Chinese - that can be a different story. If you don't have those skills, then everyone will see you as a cash cow...

monalisalee wrote:Are you for real?
There are heaps of threads on setting up a business here, and the overwhelming advice is:
DONT

exactly...

Slightly off topic... the claim is that China will become/is becoming a big economic superpower... at the expense of honesty, integrity, ethics, morals, consideration for the fellow man or anyone else for that matter... when I leave this place (I could write a few other expletives and adjectives but I wouldn't want to impinge on some people's sensitivities on SHexpat) I will avoid wherever possible buying & using anything made or originating from China. I'll vote with my buying power, and if that means I pay a more for the reassurance that something that claims to be something, is what it is, then so be it. The stuff from China - there are no guarantees whatsoever of that. Fake this, fake that, add this, remove that, skimp on this, they won't miss that... meiwenti

thats why theres so many foreign companies here... carl's jr is openning another branch... nice

sinned69 wrote:
Slightly off topic... the claim is that China will become/is becoming a big economic superpower... at the expense of honesty, integrity, ethics, morals, consideration for the fellow man or anyone else for that matter... when I leave this place (I could write a few other expletives and adjectives but I wouldn't want to impinge on some people's sensitivities on SHexpat) I will avoid wherever possible buying & using anything made or originating from China. I'll vote with my buying power, and if that means I pay a more for the reassurance that something that claims to be something, is what it is, then so be it. The stuff from China - there are no guarantees whatsoever of that. Fake this, fake that, add this, remove that, skimp on this, they won't miss that... meiwenti

Ha, sinned is preaching to the choir here.

I interrupted my viewing of a sketchy DVD to comment. Speaking of which, the money I spent on it is going to investors who obviously have the ability to flourish publicly in the China business environment, and not being wasted on law books.

General quality of products has really made quality of life zoom, pretty much since the 1970's but more rapidly since Wal Mart's been in the picture. If people keep funding it pretty soon no one will be able to shop anywhere else!

Just imagine, in 2 generations people may believe that it's normal to buy a new Large Elder Male Sibling™ brand television set every 2 weeks. After two weeks the network codes change, better upgrade! What a fun, sisyphusian shopping experience that will be!

It's that constant push of local integrity and mutual longterm personal relationship, that encourages the state of entrepreneurship here. It gives me a happy memory of bathing my dog. Push push push.

But what's really nice is the appellation "Foreigner"; isn't it elevating, like you're nothing if not a welcome guest in someone's home? We should cook their breakfast in appreciation, to express how lucky we feel. Our every need is second-guessed and provided for, our every decision anticipated, all we have to do is follow, and trust.... It's amazing how much individual validation you get from people who have none for themselves, really it is.

And then there's how truly equal so many let you know you are in passing. Quite confidence building in partnerships. But ultimately you have to really tip your hat to the rationality, that probably puts yours to shame. Sure, you studied Engels and Comte and even Marx, so it should be easy to explain why you don't want whipped cream on your low fat coffee, but you do in fact want to be waited on before the person who came in five minutes after you, or why in fact, you're up so early since you're a foreigner. Face it, your Chinese is not half as good as you thought it was. Oops, do universities give refunds?

I could write a business book and it would be called Partnering With the Past or maybe
Riding Tall on a Unicorn to the Rainbow's Gold.

For me, my little business ideas are too humble for viable break even analysis in this market. My little business ideas are too unreliable to be served by the level of competence of the local workforce and support chains, who deserve a fair profit, and want nothing but happiness for me and mine. Who strive continually for their goals whether I can provide them work tomorrow or not.

I just don't want to enter my first horse race wearing roses and no shoes. And really, I have everything to learn from China.

Cheers guys

To answer some of the above posts.

I couldn't find any specific advice on opening a shop - rather than running any other type of business - in Shanghai - I'm looking for advice from people who've done it.

I was expecting a lot of negativity - that's cool - i'm open minded enough to take being called a fool, if it is coming from people with more experience than me. And i'm not so naive that i believe this would be an easy venture.

I'll explain a bit more. The store wouldn't be my sole source of income so it doesn't need to support me (in the short/medium term). I can live with just breaking-even to begin with. I just want to know what my start-up costs would be. I know what registered capital is and i haven't got a massive bank account to sink into a business.

So.... keep the thoughts coming - even if it's just to tell me that i'm a newbie idiot. If someone has run a shop before in Shanghai i'd be interested in buying you a coffee and having a chat about it - just PM me.

There's a smallish place available to rent next to JingAn Temple. Great site, good traffic.

Price tag....146,000 RMB/month.

shanghaiwood wrote:Cheers guys
To answer some of the above posts.
I couldn't find any specific advice on opening a shop - rather than running any other type of business - in Shanghai - I'm looking for advice from people who've done it.
I was expecting a lot of negativity - that's cool - i'm open minded enough to take being called a fool, if it is coming from people with more experience than me. And i'm not so naive that i believe this would be an easy venture.
I'll explain a bit more. The store wouldn't be my sole source of income so it doesn't need to support me (in the short/medium term). I can live with just breaking-even to begin with. I just want to know what my start-up costs would be. I know what registered capital is and i haven't got a massive bank account to sink into a business.
So.... keep the thoughts coming - even if it's just to tell me that i'm a newbie idiot. If someone has run a shop before in Shanghai i'd be interested in buying you a coffee and having a chat about it - just PM me.

I personally know 3 different people that have started business here and they are all Chinese. Granted none of them as best as I could tell really developed a detail business plan or market analysis, nor did they really think the situation through taking into consideration all the factors.
Opps no wait, that should be 4 people not 3 (3 started their businesses in SH). Out of them only 1 of them is still in business and that business has now opened a shop in a city in Jiangsu province for the daughter to run. All of them though started small shops in the clothing/textile related businesses (seems like the easiest to enter with minimal capital outlay). But as it turned out for 3 of them, it wasn't easy at all. Extremely long hours, very small profit margins (so competitive), volumes just not there though fortunately each of them had their fulltime jobs or careers to fall back into when their respective business ventures failed.

I've no idea what type of industry you're thinking about trying to bite into, or what your background is. I have started multiple businesses abroad, and been successful and that was before I gained my MBA (which I got while here in China). I've developed a successful business operation here in China (not in SH) though it's very specialised (highly technical/professional market segmentation) and I had none of the associated business risk. If it wasn't for my Chinese employers contacts and the whole situation though it wouldn't have been successful.

I'd suggest that you look at some other avenues to do more homework than just asking for some views on this type of forum, which while useful will not prepare you completely for all the complexities. You could attend some business networking events and the like, there you might be better placed to meet some entrepreneurs & business owners. You might also get some business planning advice from a legal perspective etc. Contact a law office that specialises in business planning etc. Not sure what nationality you are but your consulate/embassy may have some business development forum (I know several do).


Good luck.

to Shanghaiwood,

It Is a easy way to set up a shop in Shanghai if you have enough investment and relevent experience in this business line, I can understand your worries, since you are a foreigner and heard so many negative stories about foreigners' fails or losting money everyday. But the truth is, business is business,no matter foreigners or Chinese, anybody who is not qualified enough or makes any big mistake would get kick out everyday, it is normal. I believe now is really a good time to make money in China, every where has business opportunity, people just need to find the right way and know some different business rule in here.

I am also developing my retail Fashion business in Shanghai and Zhejiang, I plan to cooperate with the malls this time. I had a shop in downtown in other city before, I know the process to operatting this thing, if you have any qustion, just ask me, hope I can give you some useful information about doing business in China.


Again, Follow your business sense, forget about the unrelevant negative stories.

Best wishes

lovebeautifullife wrote:to Shanghaiwood,

It Is a easy way to set up a shop in Shanghai if you have enough investment and relevent experience in this business line, I can understand your worries, since you are a foreigner and heard so many negative stories about foreigners' fails or losting money everyday. But the truth is, business is business,no matter foreigners or Chinese, anybody who is not qualified enough or makes any big mistake would get kick out everyday, it is normal. I believe now is really a good time to make money in China, every where has business opportunity, people just need to find the right way and know some different business rule in here.

I am also developing my retail Fashion business in Shanghai and Zhejiang, I plan to cooperate with the malls this time. I had a shop in downtown in other city before, I know the process to operatting this thing, if you have any qustion, just ask me, hope I can give you some useful information about doing business in China.


Again, Follow your business sense, forget about the unrelevant negative stories.

Best wishes

This is really reasonable and inspiring comment. I have seen negative ideas following posts asking for business advice. Following your own sense is critical to everyone in our life. Give it a try before bowing to failure.

Doroto wrote:

lovebeautifullife wrote:to Shanghaiwood,

It Is a easy way to set up a shop in Shanghai if you have enough investment and relevent experience in this business line, I can understand your worries, since you are a foreigner and heard so many negative stories about foreigners' fails or losting money everyday. But the truth is, business is business,no matter foreigners or Chinese, anybody who is not qualified enough or makes any big mistake would get kick out everyday, it is normal. I believe now is really a good time to make money in China, every where has business opportunity, people just need to find the right way and know some different business rule in here.

I am also developing my retail Fashion business in Shanghai and Zhejiang, I plan to cooperate with the malls this time. I had a shop in downtown in other city before, I know the process to operatting this thing, if you have any qustion, just ask me, hope I can give you some useful information about doing business in China.


Again, Follow your business sense, forget about the unrelevant negative stories.

Best wishes

This is really reasonable and inspiring comment. I have seen negative ideas following posts asking for business advice. Following your own sense is critical to everyone in our life. Give it a try before bowing to failure.

This advice, while specious and heart-warming is wrong. Following your own common sense in business in China will leave you rich in life experience and drained of financial resources and sanity. You need to follow the local rules here no matter how distasteful or irrational/immoral they may seem.

I didn't log on here to dump on someone's dreams or pick a fight. Just responding the OP's somewhat flame-baiting questions. The fact is that there are very very few successful western owned or run shops or businesses in this city. The risks are tremendous, the chance of failure very high. As stated, do you speak,read,write Mandarin fluently? Good, that's not even a starting point. That's assumed. Now add Shanghainese, an intimate knowledge of real estate law, tax code and government relations. Bags of cash, willingness to work 24/7 every day of the year and the stomache to knife your enemies when faced with rip-off, bribery, government intransience, partner betrayal etc... And if you think you're buggering off to Thailand or the Phillipines or wherever for three weeks at a time while your local "manager" runs the store, prepare to have your operation raped.

Bottom line is nobody cares about your "original" idea for a business, no matter how niche or special it might be. The Chinese don't understand it. Other foreigners will love it - for about 10 min until the next bauble catches their eye. The government here doesn't want or need your investment. Doesn't have the capacity to deal with people who are going to whine to them about "fairness", "intellectual property" or "honesty". The just don't give a crap. They don't want you to make money. Not at the expense of Chinese people. If they do see a spark of potential or profit in your business you will quickly find yourself out in the cold. Even huge multinationals get incredibly dicked around by the system here. A lot of them don't make money at all but are just here for the advertising/promotion value. Running their business as a placeholder until the environment "normalizes". If they can break even or take only a small loss then they can go crow to their shareholders about a China presence and sit around making pie charts about the emerging Chinese middle class. Aside from a few big car companies and other really huge infrastructure firms, the only other foreign business making money are doing it in the area of licensing, eg. KFC and Starbucks.

There are some successful counter-examples of course. But they are few and far between. There are precious few business that are able to successfully straddle that line between expat and local clients. Generally you need to go one way or the other and both paths are riddled with pitfalls. Put it this way. I've heard innumerable business ideas and pitches since coming to Shanghai. I've yet to hear one yet that has made any sense. Every now and then you run across someone who has a great idea that seems like it might catch on. Then when you talk to them for 5 min you realize what a disaster in the making it is and that they don't have a clue about the practicalities of making it work in Shanghai. Or relay the concept to a local colleague and get a completely blank "WTF?" look and realize that this budding entrepreneur is talking to his/herself and friends in an endless foreigner feedback loop that has no basis in reality.

^ This man knows what he is talking about. Please listen to him. The mere fact that you are asking for business advice on an internet forum is evidence that you don't know what you are getting yourself into. There are numerous exchange traded funds you can invest your money into that will provide a much safer return on your investment.

If ur thinking of setting up a showroom for ur wood furniture it shouldn't be that hard to get it up and running. Once ur company is setup and have rented a store location. You'll need the following licenses: 工商，消防，环保，卫生 (Commercial business, fire safety, environmental, and sanity). The last two might only apply for businesses in the food and beverage industry. I paid someone rmb60,000 for all these licenses. Taxes are done by an accountant and is roughly 17.5% for foreign owned company. As for real estate agent, just go to 3-4 different agents and let them know what ur looking for so you can get an idea for the rent in the area. Of course it would be a lot easier if u have someone u can trust that speaks Chinese. All other comments posted by others are true, but seriously, it's gonna be hard setting up shop where ever you are in the world.

Agree with Chavster. Brutal, but 'O', so TRUE.

eudaimonic wrote:^ The mere fact that you are asking for business advice on an internet forum is evidence that you don't know what you are getting yourself into.

If this guy uses this forum as the only source of information then I would agree with you...but you don't know that and therefore it's not fair to make the judgement based on assumption. Many people use the internet forums to collect very basic rough information and chances are you may find something useful or establish some sort of productive relationships.

Chavster wrote:

Doroto wrote:

lovebeautifullife wrote:to Shanghaiwood,

Even huge multinationals get incredibly dicked around by the system here. A lot of them don't make money at all but are just here for the advertising/promotion value. Running their business as a placeholder until the environment "normalizes". If they can break even or take only a small loss then they can go crow to their shareholders about a China presence and sit around making pie charts about the emerging Chinese middle class. Aside from a few big car companies and other really huge infrastructure firms, the only other foreign business making money are doing it in the area of licensing, eg. KFC and Starbucks.

Out of curiosity where did you get this info from? How many financial reports have you read and from how many MNCs? As far as I know the MNC I work for is doing well here and our bottom line is very healthy. Let's just say the margin contribution is much higher compared to what I am used to in North America. Oh and BTW we are not in the car nor are we in the infrastructure or licensing businesses.

Generalizing is always risky. I can't imagine "a lot of multinationals" will all be morons who are happy with break even or a small loss just for the sake of being here while paying heaps of money to their expat managers. No matter what you say profit is the only deciding factor to the mere existence of any business entity. Of course it will be a different story if you are running non profit or charity, which aren't the topics of the dicussion here.

With this being said I am not saying doing business in China is easy. It can be extremely frustrating and disappointing. However, bureaucracy exists everywhere. Profit is always hard to chase. In Canada the stats shows 90% failure rate for new businesses in the first three years. Sharp business skills, understanding of local political landscape, connection with local power houses and thorough research on local markets are the basic requirements for the success here.

Good luck to all entrepreneurs!

matchalatte wrote:

Chavster wrote:

Doroto wrote:

lovebeautifullife wrote:to Shanghaiwood,

Even huge multinationals get incredibly dicked around by the system here. A lot of them don't make money at all but are just here for the advertising/promotion value. Running their business as a placeholder until the environment "normalizes". If they can break even or take only a small loss then they can go crow to their shareholders about a China presence and sit around making pie charts about the emerging Chinese middle class. Aside from a few big car companies and other really huge infrastructure firms, the only other foreign business making money are doing it in the area of licensing, eg. KFC and Starbucks.

Out of curiosity where did you get this info from? How many financial reports have you read and from how many MNCs? As far as I know the MNC I work for is doing well here and our bottom line is very healthy. Let's just say the margin contribution is much higher compared to what I am used to in North America. Oh and BTW we are not in the car nor are we in the infrastructure or licensing businesses.

Generalizing is always risky. I can't imagine "a lot of multinationals" will all be morons who are happy with break even or a small loss just for the sake of being here while paying heaps of money to their expat managers. No matter what you say profit is the only deciding factor to the mere existence of any business entity. Of course it will be a different story if you are running non profit or charity, which aren't the topics of the dicussion here.

With this being said I am not saying doing business in China is easy. It can be extremely frustrating and disappointing. However, bureaucracy exists everywhere. Profit is always hard to chase. In Canada the stats shows 90% failure rate for new businesses in the first three years. Sharp business skills, understanding of local political landscape, connection with local power houses and thorough research on local markets are the basic requirements for the success here.

Good luck to all entrepreneurs!

I have worked in the past (distant) in the Chamber of Commerce, as well as the government trade office of a G7 country in BJ. I've read more reports than you've had hot breakfasts. For whatever that's worth... If you understand anything at all about business in China you'll know that reports (and financial statements for that matter) make good bed-time fictional reading.

I'm not trying to be overly cynical. I don't think one can underline clearly enough, even with forceful language how difficult it is to get a successful operation off the ground. And Shanghai might just be the toughest place in China to operate in. It's tough anywhere, but even more so when almost every variable in business in China is slanted against you.

You're mistaken in your assertion that Profit is the sole driving factor in companies wanting to set up in Shanghai. I've seen thousands of "entrepreneurs" here, dealt with hundreds of business cases. Quite the opposite is true. In fact, I'd say that China is almost unique in that so many companies abandon their profit motive and are swayed by other very persuasive factors. It's the graveyard of some very otherwise blue-chip firms and reliable people. Don't kid yourself. Potential, status, exoticism, greed and of course sex are all huge factors in some rather surprising decisions.

Haven't seen a brand yet that hasn't compromised its profitiablity, values, operational integrity, future sustainability/potential profits or some combination thereof in order to do business in the P.R.C. Those that have come the closest have been the true global behemoths. Nike, McD's, Coke etc...

You got that kind of financing?

^Very interesting inputs here, I'd love to hear more about those alternative motives, must make for good bedtime reading!

You know the old saying, "Trust is earned". 100% true in this case.

Right, it's hard to start a business anywhere, even in the US, which has arguably the most regulated business laws and legal protections in the world.

Now add to that the irregularities of Chinese business culture and you've got yourself a real challenge.

Of course there are reasonable and able people, human resources/business supports here. But only takes one flaw to derail your train, and your chances are good here, on almost every level. Do it only if you're willing to lose everything you've put into China. But the worst cost is the time and headache and disappointment in others who you thought were reliable and had mutual longterm cooperation in heart.

From willful ignorance of international marketing standards (ethnocentrism), to contractors who smell money and aren't afraid to exploit you for it. The presumptuous overly-personal familiarity that wants to know you down to your bathroom habits, but coyly evades its own disclosures with ambiguity and outright lies, that sees itself as the "guiding hand" when the guy doesn't need half the help they say he does (or the frankly insulting ego-stroking).

The very common will to corruption, the sleazy manipulations, the endemic drive to the cheapest and laziest solutions with heaps of excuses for lubrication, the lack of foresight, stakeholding, or worthwhile creative contribution (Let's call it the Happy Sunshine Company! Brand credibility? What's that? Amusing, crazy foreigners), the stratified cultural models of partnerships and other relationships ("Suck ups and Dictators"), the cultural acceptance of lying, and shrugging off other people's problems which you caused directly, the cultural inability to report negatives or claim personal accountability, the cultural inability to problem-solve....

The very rational and reasonable law that will certainly be applied in your case, but not across the street - and the almost insulting pollyanic denial of potential obstacles by your handlers - and where are these friends, I ask, after the business has failed, or if you are not interested in investing? To them, you are a joke.

Yet it's the local economy that endures the consequences of absent entrepreneurs and enterprises; hope that Face is a consolation, in the very real absence that serves those stellar models of successful local businesses.

YMMV, of course. You could do it. But not from a position of blind trust and reasonable business egalitarianism.

Bigger companies come in for a market presence that they intend to develop over time. (And some - many - have left, where are their voices of encouragement here?) Small enterprises would be better served by setting up shop in liberal democracies with regular legal protections. Capitalism is a tool in China, and China wants foreign investment for its development; not civic ideologies. Think about that.

By all means do what you think is right, you may succeed. Just recognize you are not stepping into the world of normal expectations described by reasonable and rational attitudes that value mutual success.

shinbone, eloquently put and spot on.

OP, listen to him and the others who advise against following this pipedream. Dreams are good to have but most should stay as dreams.

Last paragraph by Shinbone might be the most succinct thing I've hears about doing business here. To echo another poster. The fact that you're even asking for business advice on this forum is a bad sign. This indicates you haven't been around long enough to know the type of knucklehead responses you're likely to get. Even what sounds like rational, sensible advice found here can be tragically wrong.

Search "underH20" for clarity on this issue.

There are some success stories. Everyone has a "friend" who had some start-up or consultancy that seems to be doing well. A general sketch of the type of foreign-owned businesses that do well in Shanghai (outside the globan MNLs mentioned earlier) would look like this:

Very small operation, very lean. Can be run entirely by one or two people max. Owner proprietor is probably married or has extremely close relationship to a local. This is critical in R/E, rental, purchase/contracting operations. Probably be involved in FB industry in some way. This is because you NEED to be in some area where locals can't compete with your product. There are few other areas where a local can't do the same thing as you better and cheaper. Graphic Designer? **** off home. There's millions of them here that will work for noodle-money. DJ? Wah hahahah ha ha ha ha.... You hire local staff in an extremely limited basis. All cash flow is handled by you (meaning you or your spouse) from start to finish. All proprietary information is controlled strictly by you. Pretty much all negotiations with any type of supplier is handled by you. Vacations? forget it. Weekends? No. You will be working harder than you ever thought possible in your life. Stress levels? Maximum.

Maybe this sounds cynical to you? I don't think so. One of the reasons it's so tough to operate here, aside from all the corruption and "elastic" business values is that locals are just willing to work harder, out-sweat, and outlast everyone else. It's cut-throat all right. Are you willing to live in a corner in your place of business? Shower in the sink? Eat instant noodles 15 or 20 times a week? If yes, then welcome to your new Real Estate start-up.

I came on here about month ago with an inquiry about starting a business as well. Actually by the time I came here I had already done all my homework about starting a WFOE, including getting some legal consultation about the procedures, requirements, restrictions etc, but in the end the complexities were just too much and I came here to inquire about getting a Chinese national to register a company.

I’m happy to say that after a little over a month, my future wife has registered a consulting LLC in her name; paid up capital was a pittance!!! compared the paid up capital for a WFOE; got an ICP license a few days ago as well as our first batch of fapios; the entity can hire foreigners, but not right away.

Moral of the story - get a Chinese national to do it for you….and as a foreigner, stay out big brothers watchful gaze.


1 MONTH!!!!!!!!!!!!!!!

As per the other related thread on this topic.

For a textbook example of how to do it well in Shanghai - See Vienna Cafe.
For a classic example of China business befuddlement - See Paul Bakery.

Honestly Paul is a "paint by numbers" case study of the classic mistakes.

...

ExpatLawyer wrote:I am a Shanghai lawyer, any inquiry regarding business set up, please fell free to address me.
lawyer.phoebe@gmail.com

Pro tip: you might inspire more confidence in expats with a real email address.

Spot on advice from Chavster and Shinbone.

@OP if you really want to run your business you might want to think about that again.
As Chavstar and Shinbone mentioned, their views apply on a full time business. You on the other hand
want to run your business as side kick. I have friends who lost a great deal of money by their
"side-kick" operations in Shnghai after opening 4 locations. No one (local) screwed them over, but they were dealing with their business in a part time manner and hired a foreign manager to grow the business. Yes, that person screwed my friends big time. Who is guilty? Well, my friends.

As far as I know McDonalds does not give franchises to big companies whenever they enter a new country market. They want rather someone who has bit of money. Better yey gets a loan from the bank.
This is a pretty good security that the franchisee is working 110%

As for the stand-by mode of some MNC's mentioned earlier. I heared the same thing as well. In the luxury garments industry 1-2 are making money the others are currently promoting their products and preparing for the future, by being here for a long time. Chinese want to see you here for a while before they start trusting you and your products.