Going Global with your Franchise Brand

Expanding your brand internationally – Going Global with your Franchise Brand 

Business owners are always looking for ways to increase the value of their business and one such way is to expand the number of markets that they operate in.

If you’re a Franchisor, once a good number of domestic territories have been sold and are operating effectively, the temptation might be to look at expanding your brand internationally. But is this a good idea? When should it be done? And how?

This article “Going Global with your Franchise Brand ” will delve into some of these questions and give you an overview of where (excuse the pun) to begin!

1. Why go overseas – Going Global with your Franchise Brand

There’s a number of great reasons to take your business international:

• Expand your number of markets, the volume of business you do and increase your number of customers. This is one is fairly obvious and speaks for itself.
• Enhance your brand. With more markets comes greater and broader brand recognition, which in turn leads to more business.
• Develop a good marketing story. If you can successfully launch your brand into another country, it shows other people ‘‘if it works there, it can work here”. I once worked for a brand that launched into Mongolia. The business didn’t make the franchisor money (it broke-even), but it showcased the brand’s success in culturally different markets and it was a great story to share!
• Increase your diversification. Going into new markets will help you to diversify your business and your income, thus providing you with some protection in the event of a downturn in your current market.
• It’s exciting! One of the many rewards that come with growing your business is the fun and enjoyment of it. Franchisors must quality control their overseas markets and so, it’s not uncommon to build this into the franchise agreement to ensure that ‘someone’ from the parent company must visit on an annual basis…expenses to be paid by the franchisee, I might add.

Okay, okay I hear you say, this all sounds great, but is it worth it?

That’s a good question and ultimately you need to decide for yourself. You’d be right in thinking that going global doesn’t come without its challenges. There can be legal and regulatory complexities, issues with supply chains or simply sourcing supplies, language barriers and foreign currency exchange – if you can even get your money out of the country in the first place! More on this later…

2. When to go overseas – Going Global with your Franchise Brand

The first thing to consider is timing. When is it a good time to look into expansion overseas? To delve into this, there’s a number of things to consider:

• What are my overall business objectives?
• What is the size of my existing network and the experience of my team?
• What is the capacity of my current team?
• How would my team deal with resistance from our existing franchisees?
• Do I have robust systems and operating procedures in place?
• How will I fund the expansion?

Let’s look at each in a little bit more detail.

What are my overall business objectives?

Here, we’re talking about your long-term vision and mission for the company. What are they? Have you clearly defined, documented and communicated them across the organisation? Is ‘expanding internationally’ a part of your vision and strategy? And if it is, are you ready? When IS a good time to expand overseas?

What is the size of my existing network and the experience of my team?

Generally speaking, if you have less than 50 units in your domestic business, it probably isn’t advisable to divert your time, efforts and attention to a second (third, fourth…etc) market. You should focus some more time building your existing business before looking further afield.

This, of course, doesn’t apply to all cases. As a general rule of thumb, ensure that you have a really good foothold in your own market, that you have a stable and successful brand, that the concept is proven beyond a handful of units AND that you focus your efforts and don’t get spread too thin, too quickly. You have to walk before you can run.

Furthermore, if you only have 15 units in your first market, for example, you may struggle to convince a Master Franchisee to purchase the rights for their country. They will want to see evidence that it’s possible to grow beyond this AND that you’re actually able to provide the knowledge, expertise and support to help get them there.

What is the capacity of my current team?

Do you have the capacity to ‘spread’ yourself across two (or more) markets? You’ll need to ensure that you have enough staff and that they have the ability to take on the additional work it takes to support – not just a new person (unit) – but a new country. You’ll also need to check that you have the right people in the right roles in your organisation.

How would my team deal with resistance from our existing franchisees?

Entering into a new market will likely cause some push-back from your existing franchisees who may feel that it will detract focus from them. Are you prepared to handle this? Navigating this topic will require some good communication; you are aware of the benefits to your business, but what are the benefits for your existing franchisees and how will you highlight them?

Do I have robust systems and operating procedures in place?

This is important both at the franchisee and franchisor levels.

Your existing Operations Manual will need to be provided to the new market so that it can be localised without moving away from the core business model.

At the Franchisor level, well-documented processes and good working practices will enable your team to work both efficiently and effectively as your business grows. But they will also serve as the template for the Master Franchisee’s own Operating Manual – showing them how to manage their business when it gets to the size of yours (50+ units, for example).

How will I fund the expansion?

There are different ways of doing this, such as using cash in the business or borrowing on a line of credit. It’s best to speak with your accountant about the best option, in line with your strategic objectives. The important thing to note here is that you should look at your finances first and factor this into the equation before proceeding. Some of the costs involved in international expansion are discussed below.

3. How to do it – Going Global with your Franchise Brand

You’ll need to research the proposed new market and understand the following:

• Your unit franchise economics in that market. Arguably, one of – if not THE most important – parts of the ‘how’ is to ensure that your unit franchisees can and will be successful in this new market. Without them, you do not have a business.
• Market viability. Linked to the previous point, does your business work in the new market? Can it actually operate? For instance, Subway came undone a few years ago in Egypt, where they couldn’t source the correct ingredients to make the bread for their sandwiches. Will you be able to get all the supplies and resources you need to run the business effectively?
• Legal requirements. What are the legal and franchise-specific requirements in that market? Each market will have its own laws and franchise-specific rules so you’ll need to get a solicitor to localise your existing Franchise Agreement. In some countries, such as the USA and Canada, there are also additional requirements like Disclosure Documentation and Registration.
• What will it cost? You’ll need to register the Trademark and website domains. You’ll also need a localised franchise agreement, along with adhering to any disclosure requirements in a given market.
• Which franchise model will you use? Will you sell the Master Franchise rights? Commission an area development manager? Or sell units directly into the market yourself? Each option has its pros and cons and this is where a business consultant can help you understand some of the pitfalls before you make a decision.

Summary – Going Global with your Franchise Brand

As you can see, going global has many benefits and can be a very exciting way to continue to grow your business. However, it’s not without its challenges and hiring professional help is a good way to help you navigate the specifics, avoid the pitfalls and enter your new market smoothly. It’s important to have a good team of legal experts, accountants, marketeers, salespeople and franchise consultants on hand as you grow.

Ultimately, decide what your strategic business objectives are and if expanding your brand internationally is a good idea right now.

Author: Nick Empson, Business Coach & Franchise Consultant

[email protected]

www.levelupbcc.com

Level Up Business Coaching & Consulting provides franchising consulting services and we have a large amount of international experience. Get in touch with us today, for a free initial consultation on how you can expand your brand internationally.