Niche company connects foreign businesses with Chinese investors

Chinese investors, with cash in hand, and foreign franchisers, with good brands and projects, have a hard time connecting. And even if they are able to network, they do not trust each other's credibility and quality.

This is where Liu Wenxian, the matchmaker comes in.

He is the founder of China's first franchise exchange linking foreign franchisers and Chinese franchisees.

Established last year, Beijing Franchise Equity Exchange offers a platform for companies to conduct business in China.

The franchise model is growing in popularity in China and in industries such as fast food, coffee service and hotels. There were more than 400,000 franchising stores in China in 2010, according to the China Chain Store and Franchise Association. The number of franchise stores increased by 10 to 20 percent every year during the past five years.

Many foreign brands hope to expand in China by finding franchisees to help localize their products and services. Chinese investors also want to cash in on foreign brands.

"Many Chinese investors who want to open franchise stores are looking for good projects. Introducing more foreign brands to China can help build a more diverse market for China," Liu says.

Beijing Franchise Equity Exchange protects the interest of both franchiser and franchisee, he says. The franchiser has to be reviewed, especially on the quality of its products and financial strength. That information is provided to the franchisee to help make a decision on whether to proceed.

Liu says Chinese franchisees are most worried about franchisers' credibility.

"They are afraid they will be swindled by shell companies," he says.

Most Chinese entrepreneurs trying to open franchise stores are small, grass-roots investors who often resort to media reports to conduct background checks on potential franchisers. That is far from enough, Liu says.

Liu says his agents do due diligence research, sometimes through overseas trips, to obtain information on the franchisers.

To help facilitate new business, the Beijing Franchise Equity Exchange has several branches throughout China.

One of those branches includes the International Brand Agency Center (IBAC) based in Dalian, Northeast China's Liaoning province, which focuses on bringing new fashion brands to China.

IBAC works with the Dalian International Garments Forum, an annual international event hosted by China's Ministry of Commerce and the Dalian government. Foreign fashion brands that IBAC introduces to China can hold exhibitions during the Dalian International Garments Forum.

The brands introduced to China by IBAC are authenticated by the government.

IBAC has introduced about 100 fashion brands to China, and many of them are from European countries such as Italy, Spain and Portugal.

Gold Point is the biggest producer of Italian silk stockings in Europe. It has successfully accessed the Chinese market through the support of IBAC by opening more than 10 stores in China's first-tier and second-tier cities.

"We will help Gold Point open at least 100 stores in China this year. Those stores are located mostly in first-tier and second-tier cities, but we are sure that it will penetrate into a broader Chinese market, in the third-tier and fourth-tier cities," Liu says.

Beijing Franchise Equity Exchange is working with more than 1,000 brands to help them find franchisees in China. There are at least 12,000 franchisers keen to invest through Beijing Franchise Equity Exchange, among which 200 have successfully opened franchising stores in China.

Liu, however, does not reveal how much the exchange has earned in the past year.

Franchisers and franchisees can find more information through Beijing Franchise Equity Exchange's website.