What is the “two stores, one year” rule in franchising?

Under Article 7 of the Regulation on the Administration of Commercial Franchising, a franchisor must own at least two directly operated outlets and have been operating for more than one year. It is a basic threshold for judging whether a system has proven operating capability.

Do I have to check the franchise filing?

Yes, it is strongly advisable. Article 8 requires filing with the competent commerce authority within 15 days of concluding the first franchise contract, and provides for public disclosure of that information. If there is no filing, be especially careful before signing.

Can the association recommend a franchise brand?

No. The association does not recommend or endorse any franchise brand and does not engage in franchise recruitment. It can provide information matching and referrals within its member enterprises, but does not guarantee the outcome.

What cost is most often underestimated when opening a soup shop?

Usually not the upfront investment, but ongoing costs in materials and labour — and the loss of repeat custom when flavour is inconsistent. Weigh those two first when running the numbers.

How can I tell whether a system’s flavour can be replicated?

Look for written product standards and operating procedures. If the flavour depends entirely on one cook’s feel, quality will be hard to hold as outlets multiply.

OPENING A SHOP & FRANCHISING

A bowl of Shanxian mutton soup — The business of a bowl of soup begins as the business of a craft (photo provided by a member enterprise)

Opening a Mutton Soup Shop

The barrier to entry looks low. The work is not.
This page recommends no brand. It sets out what to look at, and what to verify.

What this page is:This is general industry guidance. It isnot an offer of franchise, investment advice, or a promise of returns. The Shanxian Mutton Soup Industry Association is not a franchisor and does not charge any franchise-related fee. The association provides information matching and referrals among member enterprises, along with public services such as standards and traceability. Whether to franchise, and with whom, is a decision each operator makes and bears themselves.

I. Settle Three Things First

Location, supply chain, craft. Whichever one is left unresolved comes back at double cost later.

Line	What to assess	How to assess it
Location and clientele	Who passes this street, and when? Soup consumption concentrates at breakfast and lunch; the evening trade is usually thinner	Count footfall by time of day; count competing shops in the same category and how often tables turn
Supply chain and raw materials	Where do the sheep come from, and can the supply be kept steady? Nine times out of ten, inconsistency in the bowl starts with the raw material	Visit the supplier's breeding and slaughtering operations; confirm long-term supply capacity and how prices move with the season
Craft and standards	Can the colour and flavour be held steady — by a master's feel, or by an executable procedure?	Ask whether written product standards and operating procedures exist; run consistency checks during the trial period

Why raw material carries the most weight

Breed, age and cut determine the gaminess and aroma of the broth. Once the raw material is unstable, even a skilled cook can only mask it with heavier spices — which is a different flavour profile altogether.

Why standards beat recipes

A recipe can be taught; a feel cannot. Writing selection, heat control and finishing into a procedure is what allows another person to produce the same bowl — and the precondition for replicating a shop.

II. Franchising vs. Going Independent

Neither route is inherently better. The difference is what you are buying with your money.

Dimension	Franchising	Independent
Brand and customers	Borrows existing brand recognition; early footfall is usually steadier	Building reputation from zero; customer acquisition is slower at first
Materials and recipes	Usually supplied centrally; consistent, but with less freedom	Free to source and compare; but you own the problem of quality variation
Training and operations	Existing manuals and a supervisory system	Self-taught; trial-and-error costs fall on you
Fee structure	Higher upfront fees, plus ongoing fees	No franchise fees, but upfront investment and error costs are yours
Autonomy	Constrained by contract (menu, pricing, procurement)	Fully autonomous — and fully exposed

How to read this:If a business is genuinely risk-free and guaranteed profitable, it normally does not need to recruit franchisees to grow. The value of a franchise is reducing the cost of finding out what works — not eliminating risk.

III. What Franchise Fees Usually Consist Of

No amounts are given here — they vary enormously by city and brand. What follows are thecomponents. Take them to any quote you receive and check item by item.

Item	What it generally is	What to ask
Franchise / brand-use fee	A one-off grant of the right to use the brand and system	How long is the term? Is it charged again on renewal?
Deposit	Security for performance; normally refundable on proper termination	On what conditions, and when, is it returned? When is it forfeited?
Equipment, fit-out, utensils	Supplied or nominated by the franchisor	May I source my own? Is the quoted price above market?
First batch of materials	Opening stock	Am I obliged to buy from the franchisor long term? How are prices adjusted?
Ongoing fees	Management fees, royalties, margin on supplies	Percentage of turnover or fixed? How is it calculated?
Training and travel	Technical training, on-site coaching	Charged separately? How many sessions, for how many people?

Risk warning:Treat any promise of "guaranteed principal", "assured profit" or "payback in X months" with particular caution. Returns depend on location, cost, staffing and the market; no party can guarantee them.

IV. Four Checks Before You Sign

These are verifiable compliance points, drawn from the Regulation on the Administration of Commercial Franchising (State Council Order No. 485).

Check	Why	How
"Two stores, one year"	The Regulation provides that a franchisor engaging in franchising must own at least two directly operated outlets and have been operating for more than one year	Ask for the addresses of those outlets and when operation began; visit them if necessary
Franchise filing	A franchisor must file with the competent commerce authority within 15 days of first concluding a franchise contract; cross-province operations file with the State Council's commerce authority	Check the filing in the Ministry of Commerce's commercial franchising information system
Trademark ownership	The party licensing the brand must actually hold the right to license it	Ask for the trademark registration certificate or authorisation, and verify the registrant, class and validity in the official trademark system
Termination and refunds	Most disputes arise here	Read word by word: termination conditions, any cooling-off period, and how remaining fees and stock are handled

Why "two stores, one year" comes first:In essence it asks how well the franchisor's own shops are doing. A system that cannot run its own outlets steadily is unlikely to provide genuine support to anyone else's.

V. What the Association Does — and Does Not Do

Stating the boundary plainly is more useful than sounding accommodating.

What it does

Draws up and promotes group standards; manages collective marks; provides technical services for product traceability; offers information matching and referrals between operators who ask and member enterprises; and compiles industry knowledge and regulatory points for public reference.

What it does not do

It does not engage in franchising or franchise recruitment, does not charge franchise fees, deposits or any franchise-related fee, does not guarantee or promise the returns of any brand, and does not carry out product certification.

If you are assessing a brand:Work through the four checks in Section IV first. The association can help with information matching within its member enterprises, but does not stand as guarantor for the outcome of any cooperation.

VI. Frequently Asked Questions

The questions people ask most before opening a mutton soup shop.

Question	Answer
What is the "two stores, one year" rule in franchising?	Under Article 7 of the Regulation on the Administration of Commercial Franchising, a franchisor must own at least two directly operated outlets and have been operating for more than one year. It is a basic threshold for judging whether a system has proven operating capability.
Do I have to check the franchise filing?	Yes, it is strongly advisable. Article 8 requires filing with the competent commerce authority within 15 days of concluding the first franchise contract, and provides for public disclosure of that information. If there is no filing, be especially careful before signing.
Can the association recommend a franchise brand?	No. The association does not recommend or endorse any franchise brand and does not engage in franchise recruitment. It can provide information matching and referrals within its member enterprises, but does not guarantee the outcome.
What cost is most often underestimated when opening a soup shop?	Usually not the upfront investment, but ongoing costs in materials and labour — and the loss of repeat custom when flavour is inconsistent. Weigh those two first when running the numbers.
How can I tell whether a system's flavour can be replicated?	Look for written product standards and operating procedures. If the flavour depends entirely on one cook's feel, quality will be hard to hold as outlets multiply.