For a business whose network is well-established in its home market, the lure of international franchising can often be irresistible.
For a business whose network is well-established in its home market, the lure of international franchising can often be irresistible. The dream is often made more attractive when individuals or businesses from foreign countries approach that franchisor with the question “Can I do what you do in my country?”
Assuming they have taken a conscious decision to embark on an international franchising project and are not just reacting to a chance enquiry, franchisors need a plan. They need to establish which markets they want to be in, which of the various entry strategies to adopt for each market, what kind of franchisee they will be looking for, how they are going to market the opportunity to them, then how they will eventually recruit, train and support those franchisees. Over and above all of that, they need to know how much it is all going to cost and how long will it take to see a return on the investment.
If you are planning to franchise your system into other countries you will first need to know how to structure your international franchise package and how to build your international support infrastructure. Although international franchising has grown exponentially over the last twenty years or so there are still relatively few people who have been around long enough to know how it all works, and more importantly why it works.
Chalking out a full proof expansion strategy
An experienced franchise consultant, ideally one who is a part of a network of similar people in a wide range of countries, will have both the knowledge and the access to wider expertise to assist with preparing a bespoke plan for every client. Once the preparation has been done and the plan and budget are in place, you can move onto how to generate and process enquiries from suitably qualified candidates. So how do the parties to an international franchising relationship meet their ideal match?
Preparation and Marketing
The consultant in the franchisor’s home country will prepare the franchise offer package and development plan. They will then work with their partner consultant in the destination country to research the market for the relevant product or service in the target market. Once all parties are confident that a marketable package has been produced, the destination market consultant will trawl their database of qualified investors who have registered to be approached when a suitable opportunity becomes available. Should that database not turn up the ideal prospect then a bespoke marketing plan using magazines, exhibitions, websites and other suitable media will be established.
Whatever the source of an enquiry, it is more likely to move through the recruitment process if it is professionally followed-up and there is a clear process of stages through which it must pass. Needless to say the process will work far better if it is being handled by a broker in the target country who can operate in the native language of the potential buyer and to their local time. Both sides should be looking for positive mutual commitment to building a sound business over many years, and this will involve working together with a common-sense approach to financing, training and support.
The franchisor needs to show evidence of a policy decision to embark on, and properly resource, an international development programme; the potential franchisee needs to demonstrate that they are adequately funded and skilled to develop business in their country. Both sides should have input to detailed market research on the product or service as well as considering the potential differences in key ratios such as property costs, wage rates or petrol prices. They should also build in some franchising research - how does the franchising market for potential franchisees differ between the countries and is the proposed fee structure and rate of franchisee roll-out realistic? What about the costs of franchisee recruitment, or local laws and cultural differences that may affect the operation?
Finding the right match
Before even despatching marketing materials, qualifying the potential franchisee can start with simple telephone screening to decide whether there is a good match based on the profiling criteria established before the recruitment project starts. After that further telephone or personal meetings, establishing that appropriate finance and experience exists, lead up to the all-important Discovery Day at the franchisor’s office in their home country.
After the Discovery Day, when the candidate returns to their home country, the local consultant can help to keep the impetus going by obtaining feedback from, and providing it to, both parties as to how things went and what outstanding issues need to be resolved.
Of course a franchisor can do all, or most of, the above themselves if they have enough experienced staff and plenty of resources. However this is rarely the case and the added complication of time differences makes it worse. Having a reliable third party who understands franchising and can nurse both parties through the process can be invaluable.
The author is Chairman of The Franchising Centre, Europe’s leading firm of franchise consultants, and a Director of the British Franchise Association.