THE burgeoning demand for franchise networks in Hong Kong has taken authorities by surprise as investors seek out new business opportunities in record numbers. Essentially, franchising can open the door into a business venture for an investor who wishes to capitalise on the name, commercial formulae, goodwill and market presence of an established business. Small and large business operators, investors with spare cash and workers displaced from the manufacturing sector have all been in on the first wave of franchising contracts. ''The cheapest franchises on offer in the territory can be started with a capital outlay of about $300,000 for a small operation,'' said Hong Kong Franchise Association manager Charlotte Chow. ''At the other end of the scale, franchise contracts can runinto multi-million dollar ventures.'' To keep up with the demand for new information, the franchise association, which was formed two years ago by the Hong Kong General Chamber of Commerce, recently had two franchising guide books translated into Chinese. ''Expectations were very high when franchising first came to the attention of the bulk of Hong Kong's business community in 1991,'' said Ms Chow, who has swapped her part-time role with the association for a full-time position to keep up with the level of demand for franchise information and advice. ''Many people saw it as a win-win business venture but we have since been able to get a more realistic message across.'' Hong Kong already has about 80 franchise networks in place and most of these originated in the US. The 7-Eleven convenience stores, McDonald's, the Theme clothing shops, Herbal Tea outlets, and the photographic processing stores Fuji and Kodak are among the high-profile franchises although not all of these outlets have been founded entirely on franchise contracts. However, as part of its brief, the association is also promoting wider applications where franchising can be used as a vehicle to boost productivity and offset surplus skills in the market created by the transfer of Hong Kong's manufacturing base to China. ''Many of the displaced workers from the manufacturing sector are in the 40-to 50-year-old age bracket and it's simply not always suitable for them to retrain,'' Ms Chow said. ''We have targeted this group by presenting them with smaller franchise options because their skills are still needed in Hong Kong.'' According to the Hong Kong Productivity Council's senior business management services consultant Peter Mok Yu-fu, being part of a large corporation is one of the biggest attractions to franchise networks for small and medium investors. ''The benefits of group advertising, quality control, ongoing research and development, staff training, bulk purchasing power, an established business programme and guidance from the franchiser all appeal to small and medium investors, especially those entering the market for the first time,'' Mr Mok said. ''There are a lot of Hong Kong people with money to invest and there are a lot of businesses that fail in the first two years. If we go down the franchise path where business experiences that have already been developed are shared, less resources will bewasted.'' The terms of franchise contracts vary greatly and intending franchisees should complete a thorough check list before entering an agreement. ''Look at the franchiser's past experience and the level of support they will be offering you,'' Mr Mok said. ''Determine the life-cycle of the business and make sure it's not going to be a short-lived fad. ''To the best of your ability, investors should also find out what the success and failure rate has been for other franchisees. Location is also critical and potential investors should check that in their area, they will not be competing against franchisees from the same corporation.'' Unlike the US, where franchise agreements are heavily regulated and include detailed disclosures, Hong Kong only has a loose framework to govern this sphere of business. A code of conduct that will be in keeping with the territory's ''positive non-intervention policy'' is currently being drafted for franchisers by the Hong Kong General Chamber of Commerce. The chamber is also preparing for the anticipated emergence of franchise consultants who will be regulated under a second code of conduct.