China's Tongrentang: no more franchises

Tongrentang Co, the largest producer of traditional Chinese medicine, has announced that the company will no longer have franchised outlets, after a scam at one of its franchised stores tarnished its reputation.

The Beijing-based company was widely criticized in June last year after one of its franchised stores in Beijing tricked foreigners brought in by travel guides into buying unnecessary and overpriced medicine.

Tongrentang said Tuesday that after an overhaul at its 46 franchised outlets, it decided not to keep them, according to Lu Jianguo, a senior official with the company.

It has already terminated contracts with seven outlets and merged another 38 stores into 18 joint-ventures, Lu said.

So far, there is only one franchise left and the company is waiting for the contract to expire, said Lu.

Tongrentang said that weak management and quality control issues in those franchised stores could easily cause problems that might damage its reputation, said Tian Ruihua, the company's chief engineer.

Tongrentang, a household name in China, was founded in 1669 and was once designated as the imperial family's medicine provider.