A Study on the Overseas Expansion Strategies of Korean Companies through an Analysis on the Business Structure of China's Food Franchise Industry

The franchise management system began to be disseminated in China with the opening of the first KFC store in the south of the Tiananmen Square in Beijing in 1987. At that time, the company of KFC in China was an equity joint venture (EJV) being the first foreign invested enterprise (FIE) as a fast food type of business within China. In 2004, the Chinese government announced the provisions of the Foreign-invested Commercial Sector Enterprises Administrative Procedures (外商投资商业领域管理办法) enabling foreign enterprises to run franchise operations officially in China, and after that, the Chinese food franchise market had been steadily expanding with the annual growth rate of 122.6% on average during 2007-2011 period, which is higher than that for social consumables by 7.6 percentage points. Even now, the fast growing trend is being kept in the Chinese food franchise market. Meanwhile, in Korea where the franchise system was introduced in 1979 with the start of Lotteria, the food franchise industry began to develop rapidly in the midst of its boom period. Together with the exploding expansion of the start-up business market followed by the IMF financial crisis in 1997, it was settled down as a major Korean industry 2with the records of having 3,800 franchise brands, KRW100 trillion of total annual sales of related industries, and 1.5 million jobs created as of the year of 2012. However, the Korea's domestic franchise industry is facing its limit due to the restrictions on opening new stores as caused by recession in its domestic markets, population and geographical limitations, and designation of business types suitable for small and medium enterprises and the negative recognition caused by some franchising firms' practices of unfair trade, etc., whereas the government is encouraging Korean firms to expand into overseas franchise markets under its policy announced in May 2013 for supporting overseas franchising, and as a result, a number o