www.franchise.org global franchising taking your brand across borders
TRANSCRIPT
www.franchise.org
Global Franchising
Taking your brand across borders
www.franchise.org
Discussion Points– Attractions of international
franchising– List of Challenges– Risks– Getting started– Structural considerations– Lessons from the trenches– Testing the waters
www.franchise.org
Attraction of international franchising
• Allure of new markets
• Create global brand recognition• Prestige factor• Potential for incremental franchise revenues
– Note: Not a fix for lack of revenue at home.– Most likely will be less NET revenue on a per unit basis then your
home base
• Potential to find untapped markets• Could benefit your offer to consumers
– Hotels– Membership type businesses
www.franchise.org
ChallengesSummary of challenges1. Local economic issues2. Stability of government3. Supply issues4. Local affiliates5. Structure6. Culture7. Language8. Time zones9. Local laws10. Legal & ethical environment11. Understanding local laws12. Realizing your brand or concept may be unknown13. Collecting your fees
www.franchise.org
Local economic issues
• Currency• The right demographics for the concept
– Purchasing power + proper degree of income
• Taxes• Local expenses which would impact the
operation of one of your franchises– Labor? Supply? Rent/land? Other etc
www.franchise.org
Stability of government
• Economic stability• Safety and security• An economy that can support
growth• A government which is business
friendly
www.franchise.org
Supply issues• Are there suppliers you can use in your target
country?• Is your concept dependant on a particular supply
chain?• Can you source what your franchise needs in the
target country?• Are there potential producers who could make
your products you need, making them a local supplier?
• If you cannot source your products needs, are the country’s trade rules/laws so restrictive making it an economic bust to import in what is needed?
www.franchise.org
Local affiliate
• Culture, distance, local customs and perhaps even language make a partner in some form a
good idea.
www.franchise.org
The right affiliateThings to look for:1. Well capitalized2. Committed to being attentive3. Able to develop a business plan & stick to it4. In for the long haul5. High standard of ethics6. References7. Accomplishments8. Good chemistry9. Franchisor material
– Leader, visionary, planner, someone who can step in for you
www.franchise.org
The right affiliate• What to avoid?
– Go back to slide 9– Anything else which may signal a
poor fit
www.franchise.org
Right Structure• How should you structure this
partnership?– Master Franchise– Area Development– Joint Venture– Area Representative
www.franchise.org
Right Structure• Master Franchise
– Virtual mirror image of franchisor• Adjustments as applicable• Usually will sub franchise
– Follows a development schedule• Units/Years
– Manages franchise, receives fees from franchisees, pays a portion to franchisor
– This model could minimize franchisor involvement
www.franchise.org
Right Structure• Area Developer
– Develops an area– More reliant on franchisor
• Could work well for:– Smaller countries close by– For a part of a large market– For those who prefer a more direct
approach
www.franchise.org
Right Structure• Joint Venture
– May have more control than a master franchise
– You may have greater responsibilities– May appear you are more committed– More costly (people, travel)– Depending on your size and objective
this could be a good way to enter certain countries.
www.franchise.org
Right StructureArea Representative • Markets the offer• Could train & service the franchisees• An agency or broker arrangement• Still could require high franchisor involvement
www.franchise.org
Considerations– Rules on taking cash out of the
country– Your legal rights and protection– Trademark – Have good local legal representation
www.franchise.org
Culture• Is your concept a good fit for
culture X?• Will your product/service need
alteration?• Does your operating model need
adjustment?• How well have other franchise
concepts done?
www.franchise.org
Language• Basic communication• Contracts• Correspondence• Franchise recruitment materials• Marketing materials• Training manuals
www.franchise.org
Time Zones• What time is it?
– Another logistic to plan for
www.franchise.org
Legal Environment1. Local laws2. Legal & ethical environment3. Understanding local laws4. Tax laws5. Trademark6. Franchise laws 7. Contract enforceability8. Culture & law
Advise: Seek expert legal advise, this is not a place to cut corners.
www.franchise.org
Marketing your conceptIs your brand known?Is your concept known?• Consider above when choosing
targets• Build your base with countries
where your concept fits, then consider going to the next level where it is less known.
www.franchise.org
Marketing your conceptWays to market1. Your web page2. Attending tradeshows3. Through your embassy4. Suppliers5. Advertising (direct & tags)
www.franchise.org
FeesUpfront fees• What is reasonable?• How do you measure?• What is your goal?The right price should
reflect – Your expected expenses– Any on site support– Discounts on initial
inventory– Translation of materials– Legal expenses
On going fees• Percent?• Flat fee?• How much?The right amount should
reflect– Provide ample incentive for
the operator– a portion back to the
franchisor to cover expenses – allow franchisor a return for
the use of the marks and systems.
www.franchise.org
Risks• Distraction from your base of
operations• Your brand’s reputation• The degree of legal protection and
recourse in case anything goes wrong• Currency fluctuation• Stability of the country & government• Security & safety• Doing nothing and missing out
www.franchise.org
Structural considerations• JV?• Direct franchising?• Master franchise?• Area development?
www.franchise.org
Lessons from the trenches• Get good legal counsel
– Enforcement– Payment– Growth expectations– Brand guidelines
• Be relationship oriented• Only sell what a buyer can
manage. Sometimes a country, other times a city.
• Be realistic when setting fees
• Have a plan– Support– Training– Communication
• Expectations should be for the long term
• If you do all the right things with the right partners you could do well.
• If you do all the right things with the wrong partners you will fail.
www.franchise.org
Getting started• Evaluate your business at home first• Develop a lens
– Economy – Culture– Language– Fit for what you sell– State of the industry you would franchise– Potential (population, standard of living)– Government (ease of moving cash, taxes,
protections)– Competition from others
www.franchise.org
Test the waters vs. taking a plunge
• Use a lens to identify potential countries for expansion and consider:– Distance– Culture– Competition– Be opportunistic– Your ability to take on more– Type of structure you will implement– Talk to others who have franchised there
www.franchise.org
Moving ahead• Have a plan• Select your next country carefully• Expand at a pace you can manage• Leave room for opportunity