At some point, as your brand grows, a time will come when the leadership team is sitting around the table and "going global" is the topic of discussion. It can be an exciting venture, and at the same time brings an entire new set of factors to consider. Where do we start? Do we have to adapt? How much do we have to adapt? Does our partner profile need to change? Does our franchise model need to change? What about our menu? The list goes on...
The extent of the answers to many of these questions, on many occasions, will be determined by the answer to the very first question. Where you start will be an important determinant in how your road to international expansion unfolds. Here are five key factors to consider when choosing where to launch your global expansion initiative.
Does your brand currently have any level of brand recognition in the market? Nowadays, travel is easier than ever, and more and more people are becoming familiar with brands and concepts outside their home market.
Notwithstanding the first point above, if there is a high level of recognition for your brand in the market, you are already ahead of the game. We've all seen it happen where a brand opens in a new market and there is a line out the door on opening day. This is a prime example of the benefits of entering a market where brand recognition exists. Doing the research to understand where you stand in the new potential market will pay off in the end for both you and your franchisees.
When expanding internationally for the first time, it can sometimes seem easiest to go to the first place where you receive interest from a franchise prospect. On one side, this could be a faster way to get the deal done. On the other, you could end up in a scenario with your first franchisee on the other side of the world, missing out on the benefits that come with expanding into a closer market. International travel and relocation are becoming more and more common, so it's likely that the population of neighboring or nearby countries has a higher percentage of clientele who have experienced (and like) your brand. Starting your international expansion in one of these markets allows you to take advantage of this brand recognition. Additionally, when it comes to supporting, training, and managing your franchise partners, expanding into a market farther from home can pose additional challenges in managing time zone differences, logistics barriers, and travel time. If this is your first time going outside your home country, the initiative will require a great deal of attention, and it will be important to have easy access to the new market to facilitate supporting your franchise partners.
What is the current market environment in your sector in the new market? Is the economy comparable to the one you are currently operating in, or is it better or worse? By assessing the economic climate in your sector, you can gauge the earning potential of your brand in the potential market. What about competition? What is the current competitive climate? Who are the big players, and what are their unique selling propositions and success rates? Competition is a good thing, as it signifies demand. When assessing the climate of competition, be sure that the level of competition is not too high or near saturation, leaving little room for the introduction of new players.
FAMILIARITY OF OFFERING
Are you entering a market where people are familiar with some version of your product/service? If your restaurant brand serves a specific type of cuisine, for example, is the market you're entering already familiar with this cuisine, or will the consumers need to be educated? If the latter is the case, you will then take on the role (and investment) of pioneering the market to educate consumers on your offering and build the demand. Should you choose to go this route, educational marketing and other similar strategies will be important for getting the customer in the door. On the plus side, this investment has the potential to pay off well, giving you an advantage over any future incoming competition, should the offering be well accepted. At the same time, it will be important to manage financial expectations, particularly on ROI, as the consumer education process could slow the ramp-up period. Entering a market where there is familiarity with your product/service reduces the need for consumer education and risk of non-acceptance. In this scenario, it will be important to analyze the competitive landscape.
Every country has its own culture, both socially and professionally. No matter which country you choose to start in, there will be a learning curve to adapt to the norms of doing business there. It will also be important to understand the consumer, as you work with your franchisee to build marketing strategies and materials. For most of us, this is one of the reasons we have chosen to enter an international market through franchising. At the same time, before we choose to enter a market, we owe it to our franchisees and to ourselves to do our research. Consider starting in a country where you and your team have a higher understanding of how business is conducted in that culture. Understanding the cultural differences between your market and the entry market will facilitate the relationship with your franchisees and help you minimize cultural faux pas. The same goes for the language. If this is the first time you are expanding into a new country, starting with a country that speaks the same language as you do, or that has a sizable population of people who speak your language will avoid the need for translating manuals, simplify employee training programs and the opening process, and minimize the transfer of knowledge getting "lost in translation."
No matter where you decide to take that first leap, keep in mind that the more research you do beforehand, the better prepared you will be for this new and exciting venture. Going international is an important step for a growing brand and, if done responsibly, can produce remarkable results for both your brand and your franchisees.
The views, thoughts, and opinions expressed in this article belong solely to the author, based on his/her industry experience and expertise and are in no way a representation of Darden Restaurants, its employees, affiliates or other related group.
An international presence can add prestige to a brand, instill pride in employees and franchisees, and add to a company's bottom line. For franchisors going international, selecting the right markets and franchisees will greatly improve their chances of success. If not carried out correctly, however, this can be a costly drain on a company's time, energy, and money.
A WORLD OF OPPORTUNITY
There are 195 countries in the world today, 193 of them members of the United Nations. With so many countries to choose from, developing a list of viable target markets begins with some serious introspection in a few key areas.
ARTICULATING CLEAR VISION
Articulating a clear vision is the first step. There are two divergent philosophies regarding international expansion. One is that customers in every market should be able to experience the brand exactly as customers do in the home market, and therefore nothing should change when going international. The second is that the overall brand experience must always be maintained, but non-core elements can be modified to meet local market demand and to conform to local business and cultural customs. The second approach defines the brand more broadly and provides greater flexibility that, if properly supported, expands the list of target markets and increases the probability of success.
Success in the domestic market as a franchisor does not guarantee success abroad. Unfortunately, stories abound about franchisors drawn to the allure of "going international" by prospective international franchisees who, in contacting the franchisor about a franchise opportunity in their country, have flattered the franchisor into thinking it is ready to franchise internationally.
Analyze the reasons for the success you have enjoyed in your home market. Understanding the characteristics of high-performing markets, the demographics and psychographics of consumers in these markets, and the appeal of your product or service with these consumers will help you to select markets with similar characteristics.
Analyze your ability to provide support to international franchisees. Among the many critical questions to ask are: How will you provide training and business coaching? How will you enforce operating and brand standards? Can you adapt your product or service if needed? Will your current supply chain be able to accommodate international franchisees? If needed, can you establish a new supply chain?
Other questions to address: Will the economics of the business be the same or will your economic model need to be modified? Are modifications needed to your IT network? Does your brand translate into other languages? Will your marketing message work, and how will marketing and advertising programs be developed for new markets? Does your staff have the bandwidth to take on a new project?
THE RIGHT MARKET FOR FRANCHISORS
As many franchisors begin to recruit franchisees in their target markets, they experience both the push and pull of international franchising. There are countries that the franchisor has targeted, and there are prospective franchisees who want to bring the concept into their country. AFA quickly evaluates a requested market and taking the time to determine the qualifications of the potential franchisee can enable a franchisor to seize a great opportunity -- and avoid the opposite.
The right market provides a powerful head start, and the right franchisee can fill gaps in the franchisor's ability to provide support, help the franchisor overcome obstacles in the marketplace, and have a positive effect on the brand's growth. When you get them right the stars are in alignment for great success.
BRAND PROTECTION IS EVERYTHING
Falling prey to flattery from prospective international franchisees, or believing in an opportunity that is "too good to be true" has caused many franchisors to lose substantial amounts of money and harmed their brand in both their domestic and foreign markets -- making it difficult for them to find qualified franchisees and expand in the future. Unfortunately, many franchisors have entirely pulled out of some foreign markets, or ended up reselling the franchise rights to a second (or even third) franchisee in certain markets because mistakes made early on in the expansion process made a healthy international lift-off almost impossible. Once harmed, the franchise brand becomes further damaged by the churning of franchisee leadership in those markets. And with each leadership churn, the level of leadership and commitment to the brand in the market exhibited by prospective international franchisees diminishes, while the franchisees' goal of getting the franchise rights "on the cheap" increases.
It's not always necessary to experience something to know it's not a good idea. But failing internationally has caused many franchisors to rethink their approach. They go back to their original vision and develop an international expansion strategy that better aligns with their readiness, both financially and operationally, to expand outside their home market. These franchisors had to absorb the losses caused by not dedicating the appropriate capital, resources, and personnel, misjudging the foreign market, and in many cases, just picking the wrong franchisee -- or worse, picking the franchisee for the wrong reasons. This is something you want to avoid, and with proper guidance by Team AFA you can.
To successfully take on the challenges of international franchising, at a minimum you must have a stable and profitable domestic business. You need a business organization that can leverage its resources to support your international franchisees, who will be the face of the brand in their local markets.
Selecting the right franchisees is as essential internationally as it is domestically, and making the right choice takes just as much dedication and time. Just as with your domestic franchisees, selection requires planning and an objective investigation into who the prospective franchisees are and whether they can be successful.
Supporting international franchisees requires having dedicated and talented people and systems both the home market and on the ground in the international market in order to provide your franchisees with the services they will need. Thinking that you can fly a field consultant over to occasionally provide support to an international franchisee is a recipe for failure. At AFA we provide the complete on the ground support function.
Business Brokerage Is a Growing Franchise Industry
Franchising dominates every industry that gets into it and has continued to create jobs at a faster pace than the rest of the economy for five consecutive years. AFA Partners help successful companies and Start-Ups break into the franchise industry and help franchisors sell more stores, capitalizing on this steadily growing industry.
Businesses that decide to franchise will benefit from consulting with AFA. The group has years of experience and has developed a proven system for franchising that is extremely helpful when assisting clients in developing their own unique franchise systems and processes.Entrepreneurs benefit from working with AFA Partners because the company works with more than many franchise companies, so a vast array of opportunities are presented at the best rates.