“96 percent of the world’s consumers and over three-quarters of the world’s purchasing power are outside of the United States”, US SBA Administrator.
“Nearly 90% of the next one billion people to attain middle-class status will be in Asia.” Homi Kharas, Brookings Institution.
“As Globalization has taken hold over the last 20 years, international growth has become a “must” for any company seeking high rates of sustained future growth.” Catherine Monson, CEO, FASTSIGNS and Chair, International Franchise Association.
Running a successful and profitable franchise is a good way to accumulate wealth and become a high net worth businessperson and entrepreneur. However, you will need to be well educated, and maybe even a certified franchise expert, if you want to see your franchise make a lot of money.
A recent survey of Franchisor members of the International Franchise Association indicated more than 80% were either international or planned to go global this decade. Having helped 40+ franchisors take their brand global, here are the questions most people have:
- Which countries have the highest potential for our specific brand?
- What is the best international development model for our specific franchise?
- Will our brand fit into the culture of other countries?
- Will we have to change our training, support, and marketing programs?
- Can we eventually make a good return on our international investment?
- What does it cost to develop our franchise outside our home country?
To answers these questions, let’s answer the why, when, how, where and with whom of taking a franchise international
Why Take Your Franchise International?
- Add new sources of franchise fees, royalties and product sales
- Reduce dependence on your home country market
- Leverage your existing technology, know-how and intellectual property
- Improved economies of scale through network growth
- Become a franchise expert
When should you take your franchise international?
- 10 units or 250 units? The number of units is not the best measure of being ready
- When your business management technology and Intranet are robust
- When you have applied for a trademark before seeking a licensee in a country
- When your training, marketing, and support resources are online
- when you’ve become familiar to franchising and an expert in the domain
- But, most of all, when you have a plan to succeed
How – The International Development Options
- Master Franchise – Franchisor grants exclusive rights for a country to one company or expert, often with the right to sub-franchise
- Area or Regional Franchise – Franchisor grants exclusive rights for part of a country. The most common method for food franchises
- Direct Franchise – Franchisor awards expert or certified franchisees and directly supports their Franchisees in a country
- Joint Venture License – Franchisor jointly invests, owns, and develops the business in a country with a local company
- Direct Investment – Franchisor owns and operates all units in a country.
Where should you take your franchise?
- Rule of Law and IP Protection – this is needed to protect your brand over time
- Country Stability – this is needed to be able to start and grow your brand
- Your consumer market size – who can. And will want to buy at your franchise
- Culture – adaptation, but not changing the brand
- Ability to get paid in a timely manner, not all countries allow freedom of payments
- Potential to Achieve An Acceptable ROI – you will have costs associated with fees
And with whom? Your international licensee should have these attributes:
- A passion for and understanding of your business
- Successful company with expert experience in appropriate sectors
- Good reputation in the country
- Experienced management to put into the business
- Access to suitable real estate
- Marketing oriented company
- Capital to start and grow your business in their country
- Preferably a licensed or certified expert themselves
A Proven International Development Strategy
- Budget conservatively for the first 3-5 years of international developments
- Be realistic in your initial fee expectations
- Realize that initial fee revenues have associated expenses over time
- Be realistic in how many countries you can award and properly support
- Plan ahead for marketing, training, and support costs
William Edwards, CFE, is CEO of Edwards Global Services (EGS) and a global advisor to CEOs. He has 47 years of expert international experience and has lived in 7 countries. He has been a certified Franchisor, an International Master Franchisee in 5 countries, and has assisted more than 40 franchisors in their global development. bedwards@edwardsglobal.com +1-949-224-3896. For more information on the Certified Franchise Executive program, please go to this link: http://bit.ly/3ulCfpE
