Licensing I-Cafés The China Way

This blog post must not be misconstrued as suggesting or recommending the licensing of i-cafés in the country to adopt or follow the way they do it in China. Aside from the describing the way they do it there, it is my hope that our government look at the current free-for-all method of licensing i-cafés in order to address the high attrition rate in the industry.

In my personal observation, as much as thirty (30%) percent of i-café businesses in a town or city close or go bankrupt in the first six (6) months to one (1) year of their operations. While new ones open at practically the same rate, their chance of survival is low and the cycle had been going on for more than five (5) years now. The money going down the drain on such failed ventures is not small amount if we consider that the phenomenon is happening all over the country.

As early as 2003, the Ministry of Culture in China published a notice to enhance the chain management of venues providing Internet access to the public. The Ministry’s focus was on preventing minors from entering i-cafés. Considering the supply and demand of the market, the Ministry decided not to increase the total number of i-cafés in 2007 and ordered local governments not to approve new internet cafés.

In September 2009, the Ministry of Culture published a method for the certification and management of Internet café chain enterprises. It issued a clear and detailed definition for those who would engage in the business and according to the method, an i-café chain enterprise should have registered capital of no less than CNY50 million (USD7.5M); wholly-own or have a controlling stake in no less than thirty (30) i-cafés and have Internet cafés in three or more provinces. Single-unit franchising is allowed and the expense is about CNY2 million (USD0.3M) per i-café including alliance expense, decoration and equipments.

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