Assessing a Franchise in China: How to Visit Typical Outlets and Spot Showcase Bias

Before joining a franchise network, visiting outlets in person is an important way to test the brand’s business model. But the busy outlets selected by head office may benefit from preferential rent, extra staff or launch marketing support that does not reflect the day-to-day experience of a typical franchisee. The aim is not to confirm that “this outlet is busy”, but to understand why it works and whether you could secure the same conditions.

1. Get an outlet list before deciding where to visit

Do not leave the entire itinerary to the franchise sales team. First, ask the brand to distinguish between company-owned and franchised outlets, giving their locations, opening dates and operating status. Ask which outlets also serve as training centres, showrooms or sites for testing new products. Showcase outlets are worth visiting, but they should not be your only source of evidence.

China has specific rules governing commercial franchising. The Regulations on the Administration of Commercial Franchising require franchisors to disclose specified information in writing and provide a copy of the contract at least 30 days before it is signed. The Measures for the Administration of Information Disclosure in Commercial Franchising further require disclosure of information including the number and geographical distribution of franchisees in mainland China, and an assessment of their operating performance. These materials can be a starting point for planning visits, but they do not give you an entitlement to every outlet’s full accounts or an operator’s private contact details.

Choose a varied sample around your own plans:

• Comparable outlets: Look for locations with a similar city profile, trading area, floor space and core customer base to your proposed outlet.
• Different stages of operation: Visit both new outlets and those that have moved beyond their launch promotions.
• Different levels of performance: Alongside the brand’s recommended outlets, try to contact franchisees with more ordinary results, or those who have left the network.

If the brand only allows you to visit one showcase outlet, that does not in itself establish fraud. However, you should record the lack of evidence from typical outlets as an unresolved investment risk.

2. Observe the whole operation, not just photographs of queues

Where possible, observe the same outlet on different days and at different times, distinguishing weekdays from weekends and lunchtime or evening peaks from quieter periods. A queue on one occasion could result from a promotion, a batch of order collections or slow service. It is not direct evidence of sustained profitability.

Keep your on-site notes focused on facts you can check: the floor area actually in use, the number of staff on duty, customer arrivals and purchases, the frequency of online order collections, and whether substantial discounts appear to be driving demand. Do not disrupt trading, photograph customers’ personal information or capture back-office screens without permission.

More importantly, ask about any special arrangements. Does the operator own the premises? Does the rent include property management charges? Do the owner and family members regularly work unpaid? Does head office provide on-site staff, subsidise marketing or cover some wastage? All of these conditions affect whether you could replicate the outlet’s performance.

Divide your notes into three columns: “Observed first-hand”, “Reported by the owner” and “Supported by documents”. Frequent collections by delivery riders show only that there is delivery demand during that period. Without platform settlement records and cost information, you cannot turn order volumes into net profit figures.

3. Ask franchisees about specific experiences, not general impressions

Use an outlet’s publicly listed business contact details to request an appointment politely. Where the operator agrees, try to speak without the franchise sales team present. Explain that you are assessing a franchise opportunity, that you are not asking them to disclose trade secrets and that they are under no obligation to take part.

Rather than asking “Is this a good brand?”, focus on things that have actually happened:

• Which opening costs were easiest to overlook? Which pieces of equipment turned out to be rarely used?
• When the outlet faced stock shortages, system failures or staffing gaps, what did head office actually do?
• What ongoing support remained after the launch period? How long did requests for support take?
• If you were choosing again, what would you most want to clarify before signing?

Ask different operators the same questions wherever possible. One satisfied franchisee may benefit from an excellent location; one loss-making outlet may be affected by local demand or its own management. Do not treat a single interview as a verdict on the entire network.

If someone is willing to show you records, first agree how the information will be used and what must remain confidential. Prioritise anonymised summary information. Also note whether head office is present, whether the outlet has ties to head office, and whether the interviewee could receive a referral reward. These factors may help you judge whether their comments have been influenced.

4. Turn discrepancies into points to resolve before signing

After your visits, create a comparison table with “Sales claims”, “Disclosed information”, “Outlet feedback” and “Questions still to be answered” side by side. For example, if head office says a typical outlet does not require the owner to manage it on site, but several franchisees say the owner must attend every day, this is not merely a difference of opinion. It is a staffing and time commitment that needs checking.

Ask the brand to explain significant discrepancies in writing and clarify whether its recommended outlets are representative. The Regulations on the Administration of Commercial Franchising require disclosed information to be truthful, accurate and complete, and prohibit withholding relevant information or providing false information. However, a single outlet’s experience differing from promotional claims does not automatically establish a breach of the law. That requires consideration of the specific statements, the evidence and their effect on the investment decision.

If a particular condition determines whether you will proceed — such as on-site staff during the launch period, a specified equipment package or marketing support — include it in the contract or an annex. State the conditions that apply, the duration and who is responsible for providing or paying for it. Do not assume that a concession granted to another outlet is something you are also entitled to receive.

Practical takeaway: Before signing, establish at least what keeps a typical franchised outlet viable, which special arrangements benefit the showcase outlets, and whether those arrangements could apply to your own business. If key differences have not been reliably explained, investigate further. Do not let making a payment take the place of making an informed judgement.