International Franchise Expansion
The benefits franchising offers in developing a home market are amplified in international markets. For established franchisors, international is the next logical step in growing their brand. Companies that do not franchise at home look to international franchising as a means of gaining local market expertise while reducing their capital requirements for market development and lessening their overall risk.
Our on-hands experience and vast expertise in developing international franchises is one of the benefits of working with MSA. We help:
- U.S. franchisors expand into international markets
- International companies enter the U.S. market
- Companies that do not franchise in their home markets utilize franchising for their international expansion
We understand the requirements for developing an international expansion strategy for proactive growth that enables our clients to achieve their goals. We assist our clients with:
- Determining the resources required for international expansion
- Identifying and evaluating target markets
- Determining the structure of their international franchise program
- Determining a fee schedule for international franchisees
- Identifying the target franchisee(s)
- International lead generation and sales process
- Changes to the product and service offering
- Modifications to franchisee support programs
- Implementation of the international program
Successful international expansion requires that each market be evaluated individually. There is often a “push-pull”; countries that the company would like to enter, and those where someone has approached the company about bringing the concept to their market. The MSA process for market evaluation helps our clients to be proactive in marketing their franchise opportunity while not passing up a great opportunity that comes to them.
Companies should anticipate that as they expand from one country to the next, certain adaptations will be needed. These issues need to be thought through before the final negotiations with an international franchisee. At MSA we’ve been through these issues and more. We can shorten your learning curve in global markets. Among them are:
- Product and Service Offering – Local tastes and religious practices, as well as cultural differences, may require a change in the products and services that are part of the offering. These can range from slight modifications to creating a new product line. Changes in products and services often require changes in supply lines, inventory requirements, IT systems, Operations Manuals, and Training Programs.
- Methods of Operation – The businesses practices utilized at home may not readily work in your new market. For example, here in the U.S. payments drafted from credit cards are common, but in some countries where credit card usage is not as prevalent this practice may require a change.
- Site Requirements – To operate on a high street in some markets such as Paris, London, or Tokyo may require that the franchisor develop a smaller footprint than what they have at home
- Supply Chain – The ability to supply products and equipment to franchisees can require franchisors to rethink their approach to their distribution methods. Shipping requirements, timing, customs, and duties can affect inventory levels and make the local sourcing of certain products more attractive, both practically and economically
- Marketing and Advertising – Simply handing off your current marketing and advertising materials will rarely work. Consider whether you are introducing a new product category or a new brand, how the advertising will translate into the local language (KFC’s “finger lickin’ good translates in Chinese to “eat your fingers off,” and one translation of Pepsi’s “Come alive with the Pepsi generation" in Taiwan is “brings your ancestors back from the dead"). Another advertising-related issue is where to establish a marketing or brand fund; in each country, regionally, or should international franchisees contribute to the fund at headquarters?
- Operations Manuals and Training – Modifications are generally necessary for product and service changes, methods of operation, and local culture. Translating materials into local language can be a major expense in entering a new market. While the local franchisee generally handles the translation, who pays the bill should be a part of the initial negotiations.
- IT – Modifications are sometimes required for a local market, especially in less developed countries.
- Standards Enforcement – How and by whom operating standards will be monitored is important to building a strong relationship with franchisees and protecting the brand. Technology can lift some of the burden from a franchisor, but nothing replaces in-country visits and face-to-face communications.