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Advisory 2009-11-24

Spreading wings overseas

Having established and expanded your franchise business nationally with great success, the next step a franchisor would look forward to is to explore international markets for the growth of the franchise. Let us find out the know how of expanding internat

By Chief Sub Editor
Spreading wings overseas

Being a successful franchise business owner it is but obvious for a franchisor to discover new horizons for his business. After achieving a considerable success on the domestic front a franchisor starts thinking about expanding in the international market. The article is a guide for all those franchisors who aspire to expand overseas.

Aiming at specific countries

It is advisable for all the potential franchisors aiming international growth to initiate their international prospects by targeting a particular country or set of countries where they would like to expand. For this, franchisors need to recognise the best countries for a particular concept. They are also advised to consider certain factors before they zero down on their international expansion plan. These factors are:

  • Franchise climate of the particular country or set of countries
  • Market for particular product or service
  • Competitive concerns
  • Legal climate
  • Proximity
  • Language bars
  • Cultural background

Searching for franchisees

Having identified an appropriate market to be targeted the franchisor can discover prospective international franchisees in a number of ways. These are:

  • Advertising
  • Searching online
  • Franchise and trade shows
  • PR agencies
  • Direct mails and
  • Taking the help of brokers

Out of all these methods the most effective approach for the franchisors to search for prospective franchisees is taking help of brokers specialised in international franchise development. Their know-how of specific markets, along with contacts and resources in those markets, help brokers to effectively promote the franchise businesses.

Modes of expansion

Having identified the best prospective international franchise candidate, the next step to put forward is to deal with the structure of transaction. The most challenging part of expanding in international market is to identify the mode of expansion. There are three most common and popular modes for overseas expansion.

  • Direct franchising: Through this mode the franchisor sells the franchisees and tries to directly support those franchises in the market. However, this is the most difficult method of entering an international market.
  • Joint ventures: This mode of expansion has the advantage of allowing the franchisor to participate in the equity admiration of the foreign entity while providing it with an ongoing revenue stream, generally based on gross sales.
  • Master franchise or area developer: The most popular method of entering an international market is by using a countrywide master franchise or area developer. He/she is typically referred to as a master licensee.

Franchise Regulation concerns

While expanding internationally the most important thing to be considered by the franchisor is the franchise regulation of a particular country. Franchisors need to be aware of the franchise laws of a particular country as they have to expand as per the laws and in case of any legal issues the law of that particular country will be followed. Not all the countries that are into franchising have defined franchise laws. The countries that have defined franchise regulation are: US, provinces of Canada, Australia, Brazil, China, France, Indonesia, Italy, Japan, Malaysia, Mexico, Russia, South Korea, Spain and Venezuela.

Hopefully the article proves to be of some help to all those franchisors who are ready to take the flight to spread the wings of your franchise internationally.

So, What are you waiting for? Just!!! Get, Set ready to take off…

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