Brian Duckett, chairman of The Franchising Centre explains the key factors franchisors must consider before global expansion
Just about every franchisor in the world has had a phone call or e-mail from someone in a distant land asking if they can be that franchisor’s franchisee in their country, however, such an approach is not the time to start franchising internationally. It may, however, be the time and the trigger for starting to think about it.
Thinking about global expansion means asking yourself a number of questions, not least examining your motivation for having outlets in other countries and confirming that you are willing to devote the necessary human and financial resources to what will inevitably be a long-term investment.
Like most questions in franchising there are no right answers to why, or how, to go about it, but there may well be a right way for your business.
Know Your Options
Typically the best time to start planning international expansion is when the franchisor believes they are reaching capacity in their home market. At this point there are four options available:
- Put other products or services into existing franchisees
- Acquire or start another franchised network in the home market
- Sell the business and move on to something else
- Go international
The latter is unquestionably the most challenging and will undoubtedly cost much more and take much longer than anyone initially thought possible.
However, if it is done for the right reason, which is to truly build an international brand and further enhance the value of the business, then it can also be the most exciting and rewarding.
When franchisors approach my business to ask for our advice and help with their international growth, our first question is to find out why they are interested in such a move.
Amongst the more unusual replies we’ve received are: “It would be great to have a holiday touring Europe every year, paid for by visiting all our franchisees”; “All our competitors seem to be doing it so we thought we should jump on the bandwagon”; or “That will really stick it to my mother-in-law who thinks I’m not good enough for her daughter”.
Better answers include: “We’ve analysed some markets and know there are real opportunities in France, Germany and Spain”; “We’ve been approached by an established food service business in the Middle East which is looking to add further concepts to its range”; or “We have the vision and the desire to eventually be the biggest and best business in our sector, in the world”. Needless to say, franchisors with these attitudes are more likely to succeed.
Many people think that franchising internationally is no different to franchising domestically and in some ways they are right. You need to have a detailed business plan and budget, agreements and manuals, an attractive franchise offer package, a clearly defined franchisee profile and recruitment system, processes for training, and continually monitor and support your franchisees. So why is opening an outlet in Delhi any different to opening one in Doncaster? For a start there’s the matter of distance, time difference, language and culture. Then legal, accounting and administration regulations which will be different in every market, some of which will apply according to the sector you operate in, and some will affect operations because the business operates as a franchise. Before you get into any of that, you need to know whether you will operate through a branch or subsidiary of your own business, or whether you will look for direct franchisees, a master franchisee or an area developer. Every franchisor will find different answers to all of these questions before they come up with the right way for their business. Remember, there’s no universal blueprint for global success.
There’s a lot to think about and the battleground of international franchising is littered with the corpses of inexperienced executives who tried the do-it-yourself approach.
Many years of practical experience helping franchised businesses move around the world has led me to believe that it will be a much easier process if the franchisor engages with a network of experienced professional practitioners who are used to working with each other. Local professional partners in the target country will be able to quickly establish which local rules apply to the business in question and what needs to be done. They may even be able to come up with a shortlist of potential investors in the proposed operation.
How To Achieve
The key to success is to first establish why you want to go international, where you want to go and how much you will have to invest before you start to see a return. Many franchisors when asked what markets they are interested in will reply that any will do, but the truth is that some will be better than others. You have to consider key factors such as language and attitude towards franchising. The true attractiveness of a market is whether people there are likely to buy the product or service that’s the subject of the franchise. If they do not buy into the product then regardless of method, it’ll be unsuccessful for your business and franchisees.
International franchising has grown exponentially over the last 10 years and there is plenty of advice available from franchise associations, consultants, brokers and franchisors with first-hand experience.
New entrants who are expanding for the right reasons, plan properly and devote the necessary resources, have every chance of success.
About The Author
Brian Duckett is chairman of The Franchising Centre, Europe’s leading firm of franchise consultants, and a director of the British Franchise Association. He has made his living from franchising since 1976, initially as a franchisee, then a franchisor and for the last twenty years as a consultant to potential and practising franchisors.
His firm coordinates an informal network of franchise practitioners, which has representation in more than 40 countries worldwide. He can be contacted by e-mail at brian@ thefranchisingcentre.com