International franchising is a tempting step but one that can spell disaster for those who are unready, says Justin Livingston, Coyote Ugly’s
VP of Global Development
The world is becoming a smaller and smaller place and more franchises are looking to position their brand for global domination. It’s exciting to think of taking a home-grown brand and expanding to a global audience of potential franchisees, but international expansion is not for the faint of heart and fortune favors the prepared. As more and more franchises look to cross borders and oceans, consider what it will take to become a global concept and then take a serious look at your level of preparedness for the task. For those who do their due diligence and go into the expansion well-prepared, educated, and with the appropriate amount of resources, the potential is almost limitless. Global expansion takes a considerable amount of resources before signing the first franchise agreement and there are pitfalls to avoid. These are the major likely pitfalls and how to avoid them.
Why look beyond my borders in the first place?
The first question you should be asking yourself when it comes to global expansion is “why am I doing this?” There are many reasons to take a brand international including access to the massive world-wide consumer market, long-term diversification of revenues for the company, strengthening the brand, lessening the impact of a specific market’s economic fluctuations, and many more. If you find yourself saying, “why not?”, or, “it seems trendy”, you are probably not ready.
If executed properly, a well thought-out international franchising strategy can transform a company into a global franchise organization. Access to a world-wide market can increase revenues far beyond the capabilities and limitations of a domestic-only focus. International expansion helps to ensure the long-term growth and health of a company, but be sure you are taking these steps for the right reasons and that you are fully prepared. Many companies find themselves expanding as a reaction to a potential buyer far before they are ready and as amazing as the up-front benefits seem to be, the consequences of moving forward at the wrong time or unprepared can do damage that few companies can rebound from. The moral of the story is don’t rush, take your time, do your homework, and be sure you have the right motivations and resources to begin the process of global expansion.
What kind of resources does international expansion take?
A close second pitfall to not doing enough homework to determine if a concept is ready to expand internationally is the assumption that you have sufficient resources. International franchise expansion takes a team dedicated to that task and complete buy-in from upper management/ownership. A common bad assumption for international expansion is the idea that you can do everything for your international program with your domestic support and development teams. This is rarely true and can obliterate your core business. Unless your support teams have extra time and are looking to learn and master a new skill, they are probably not your international team. Franchisees in different countries, different cultures, and different time zones use up a lot of resources, in terms of both time and money.
Development and operational support for international franchisees requires a different skill set from that of your domestic teams. Certainly, the training programs and ongoing support parallels the existing domestic-focused program, but these need to be adapted to accommodate different languages, cultures, and local needs, as well as localization of the product or service. Because of this, you must carefully consider the abilities of your team and anticipate their needs.
Consider also:
What will happen if your team goes abroad to open a location?
What will that diversion of focus do to your existing business?
What are the needs you don’t even know you have yet?
Seek help and advice from those who have done this and hire or assign one key player to oversee the international program.
How do I protect my brand?
Your brand and your marks are all you have, so protecting them must be priority one. By granting an international franchise agreement, you are allowing your brand to be represented in a market you don’t fully understand in a location you will likely visit far less often than your domestic locations. There are many things you need to do to protect your brand, ranging from ensuring your marks are registered in every market and developing an agreement to creating operations manuals. And, of course, you must find the right franchisee partner, one that you believe you can set up for success and will be a good steward of your brand.
Once you have the systems in place, execution depends on the franchise partner and system of franchising. A concept must decide what path of business relationship is right for them. Are you seeking a joint venture partner, a multi-unit franchisee or a master franchise? Will you allow them to sub-franchise? Each of these programs carry different styles of a business relationship and have different legal ramifications. Having a development process to correctly market and thoroughly vet franchise candidates is critical to finding the correct franchise partner. As you begin international expansion, your first international franchisees will be the proof of concept that will set you up for future, long-term growth into other markets. You must decide what’s important to your brand and take every precaution to protect it through training, processes and contracts, and have ongoing oversight of your brand.
Do I have to localize for every new market?
Understanding the cultural differences of each market and how your brand will translate into that market is key to success. Will the local culture embrace your brand? Do your points of differentiation mean the same thing in this new market? Do common practices for your brand violate any cultural norms of the potential market? Ensuring you are entering a market that will embrace your brand is the difference of a successful launch into a new country or a very costly failure. Entering any market without sensitivity to local needs will set up your brand for certain failure. This knowledge is vital to prioritize which markets to target and where to begin the search for the right franchisee.
Conclusion
International expansion is an exciting adventure. When executed thoughtfully and with purpose, it allows for long-term success and meteoric brand expansion. The world can be a small place but success depends on cautious, informed, strategic growth. Brands cannot assume what works in one market and culture will work in another. Strategies need to fulfill the needs of the brand, the franchisee, and the consumers in the target market. International expansion is complicated and growth consumes a lot of time and money but the rewards are unrivaled. Becoming a global brand takes time, dedication of resources, careful planning, and utilization of experts who have gone down this path before.
