Chinese electronics retailer Suning has ended its franchise business model and has spent RMB300 million re-fitting its 120 chain stores for direct-owned operations.
Suning says that due to limited funds and management capacity, it had to allow some regions to develop through franchises in the early stages of development. As of December 15, 2007, it had signed with 19 franchise enterprises and opened 120 franchise stores, most of which expired at the end of 2007.
Suning says it began to consult each franchisee in October 2007 about the ending of the franchise pattern. By December 27, it had signed agreements with all 19 enterprises on the termination of the franchise relationship. Suning also paid RMB13.75 million to the enterprises whose franchise terms had not expired by the end of 2007.
At the same time, it took over the operation channels, staff, fixed assets and chain stores of the original franchise enterprises for RMB285.85 million.
The 120 chain stores has brought the total number of Suning's stores to over 700 in Greater China.