Investing in an overseas franchise brand? Choose wisely, Richard Holden, head of franchising for Lloyds Banking Group, says
Some of the most successful franchise brands operating in the UK originated abroad, so it’s natural to think that international prospects may offer an investor the next big money making opportunity.
Investing in an international franchise brand that’s new to the UK may seem an attractive option, particularly if it’s already incredibly successful in its home market. However, there’s a necessity to tread cautiously.
It’s important to understand what research the brand has already undertaken to identify the UK as a viable new market.
Occasionally, an international franchisor will look to develop a support office in the UK and directly franchise the brand and operating model to investors.
This investment by the franchisor shows its commitment to succeeding in the UK, although it would need to have a good understanding of the local market to be able to advise franchisees about issues that may impact their business - for example, locating premises, demographics, employment legislation, market trends, taxation and the supply chain.
Be guarded about international brands that offer remote support without having a true, on-the-ground presence here.
It’s more common for international brands to develop through a master franchisee. This is someone who has purchased the licensing rights to operate the franchise in the UK.
The model allows an entrepreneur to build a network of investors with the business model and systems that have already been developed by the franchisor. An advantage with master franchising can be that the individual who has purchased the rights should have a good understanding of the UK market.
It’s their responsibility to prove the franchise model works in the UK before they start recruiting, training and supporting franchisees.
The franchise opportunity is only as good as the master franchisee that supports it and, in the early stages of its UK development, the master franchisee will themselves be learning and often make mistakes that could impact on a franchisee’s own chances of success.
Eye on expansion
More and more international brands are looking at the UK as an expansion market. If their franchise model is structured in the right way, many of them stand a good chance of adding to the success of overseas brands that are already established franchise opportunities here in the UK.
Some international brands have tried and failed to successfully launch over here, so it’s important investors undertake thorough research and choose wisely before making any commitment.
Speak to the Lloyds Banking Group franchise experts for guidance.