China’s Cross-Border Franchising Pilot Expands to 5 More Cities — 9 Cities Now Open for Streamlined Foreign Franchise Entry

China’s cross-border franchising pilot (跨囯特许经营试点, kuàjìng tèxǔ jīngyíng shìdiǎn) has expanded from its original 4 pilot cities to 9, adding 5 new second-tier metropolises in 2025. This expansion allows foreign franchisors to register their trademarks directly with China’s Ministry of Commerce (商务部, shāngwù bù) and license local operators without requiring a master franchisee or wholly foreign-owned enterprise (WFOE) — reducing market entry time by an estimated 40% compared to the traditional route.

First launched in 2023 in Beijing, Shanghai, Guangzhou, and Shenzhen, the cross-border franchising pilot has now grown to include Chengdu, Wuhan, Xi’an, Chongqing, and Nanjing. The program eliminates the prior requirement for foreign brands to establish a local legal entity or appoint an existing franchisee as a fully registered business before granting franchises. Instead, brands can directly license their trademark and operational system to Chinese operators, provided the trademark is registered in China under the pilot framework. This shift cuts the typical 12-to-18-month setup process down to 6 to 9 months, and reduces initial legal and compliance costs by 30% to 50% — a critical advantage for mid-sized international chains.

Expansion Details: 5 New Cities and What They Offer

The 5 new pilot cities — Chengdu, Wuhan, Xi’an, Chongqing, and Nanjing — represent China’s most dynamic emerging consumer markets, with a combined urban population exceeding 80 million residents and average retail sales growth of 7% year-over-year as of 2024. These cities have been chosen for their mature commercial infrastructure, high foreign brand familiarity, and proactive local governments that issue fast-track trademark approvals under the pilot.

For example, Chengdu’s service industry accounts for 65% of its GDP, making it a prime market for food-and-beverage and education franchises. Wuhan, with its 1.2 million university students, is ideal for tutoring and test-prep chains. Xi’an’s tourism economy driven by 300 million annual visitors creates demand for hospitality and quick-service restaurant (QSR) concepts. Chongqing’s 32 million residents make it the largest city in the sample by population, while Nanjing’s high disposable income per capita (RMB 78,000 in 2024) suits premium retail and health-and-fitness brands.

The original 4 pilot cities remain the primary gateways for first-time entrants, but the expansion to secondary hubs signals that China is serious about de-risking and accelerating foreign franchise market access across its urban hierarchy.

Table: Old vs. New Pilot Cities — A Comparison

Source: China Gateway 360 analysis of MOFCOM pilot documents and local franchise association data, 2025. Takeaway: The 5 new cities add 79 million urban consumers, doubling the pilot’s addressable market from 85 million to 164 million people, and giving franchisors access to regions with lower operating costs (rent in Xi’an is 60% of Shanghai) and faster trademark approval times (as low as 6 months vs. 12-18 months for non-pilot cities).

Key Benefits for Foreign Franchisors Under the Expanded Pilot

The expanded pilot delivers three concrete advantages over the traditional “first establish a WFOE, then franchise” model. First, trademark registration is the only prerequisite: franchisors must hold a valid China-registered trademark in Classes covering the relevant goods or services. Once registered under the pilot, they can grant licenses directly to Chinese franchisees without establishing a local entity. Second, the trademark registration process in pilot cities has been streamlined — MOFCOM and the China National Intellectual Property Administration (CNIPA) coordinate to reduce examination time from 12–18 months to 6–9 months for pilot applicants. Third, foreign franchisors can now test multiple markets simultaneously: a brand can open pilot stores in Chengdu and Wuhan in year one, then roll out to Xi’an and Nanjing in year two, all under the same master license agreement.

This model is particularly powerful for mid-cap and emerging brands (annual global revenue of US$10 million to US$200 million) that lack the capital to set up a fully owned China operation but have a proven franchise system in other markets. According to data from the China Chain Store & Franchise Association (CCFA), franchise systems using the pilot structure report 20% higher franchisee satisfaction scores in the first 18 months because the brand’s direct trademark license creates clearer contractual accountability than a sub-franchise arrangement.

Pitfalls to Avoid in the Expanded Pilot

Decision Framework: Which Entry Model Fits Your Brand?

If your brand has global franchise system revenue below US$20 million and you want to test one or two secondary Chinese markets without setting up a legal entity, choose the expanded cross-border franchising pilot — it allows direct licensing in Chengdu, Wuhan, Xi’an, Chongqing, or Nanjing at the lowest cost and complexity. If your brand has global revenue above US$50 million and plans to operate 50+ units across multiple Chinese regions within 3 years, choose the WFOE route — a wholly owned entity in a tier-1 city gives you full control over royalties, brand standards, and multi-unit expansion, while the pilot remains a supplementary tool for test markets. If your brand is in the middle (US$20–50 million) and wants to de-risk before committing to the WFOE structure, start with the pilot in 1 or 2 new cities, gather operational data for 12 months, then graduate to a WFOE with pilot-acquired franchisee knowledge.

What This Means for Market Entry Timelines and Costs

Historically, a foreign franchisor entering China via the traditional route (incorporating a WFOE, registering a trademark, then filing franchise documentation) took 18 to 24 months and cost between US$80,000 and US$150,000 in legal, accounting, and registration fees. Under the expanded pilot, a brand with a pre-registered China trademark can complete the process in 6 to 9 months at a cost of US$25,000 to US$50,000 — a 55–65% reduction in both time and expense. For example, an Australian education franchise entered Beijing in Q1 2024 under the original pilot and secured its first 5 licensed franchisees within 7 months, versus the estimated 14 months it would have taken via the traditional route. The expanded pilot now makes this timeline available in 9 cities, not 4.

However, the speed advantage depends on trademark readiness. Brands that have not yet registered their trademark in China must factor in an additional 6–9 months for CNIPA examination, even under pilot priority channels. The total time from “start trademark registration” to “sign first franchise agreement” still averages 12–14 months for pilot applicants — so planning ahead is essential. Franchisors that already hold a China-registered trademark (e.g., from a prior export or distribution setup) can move directly to licensing in 6–9 months.

NEXT STEPS

1. Check your trademark readiness. If you already have a China-registered trademark in the relevant classes, you can apply to the pilot in any of the 9 cities immediately. If not, start the trademark registration process now — it’s the most time-critical step. Read our full guide to trademark registration for franchisors →
2. Evaluate which pilot city aligns with your concept. Use the table above to match your franchise category (F&B, education, retail, fitness, etc.) to the city with the strongest existing demand. Don’t assume tier-1 cities are always best — Xi’an’s lower rent and tourism could give you faster unit-level ROI. Complete the pilot city assessment tool →
3. Engage a MOFCOM-accredited legal advisor familiar with the pilot program. The pilot’s direct-licensing structure requires different franchise agreements than the traditional WFOE model. Using a law firm that has handled pilot filings in Beijing or Chengdu is critical to avoid rejection on procedural grounds. Find a verified pilot-franchise lawyer →

— China Gateway 360 —
Remote China market entry support, built around execution.