franchising aspects Sep, 06 2010

Strategic Keys to Franchise Globally

To expand the business far and wide, nationally and internationally is every aspiring entrepreneur’s dream. This is especially true in case of franchise businesses. However, international expansion requires lot of intensive and strategic planning. Read

By Abha Garyali
Sub Editor
Strategic Keys to Franchise Globally

Every franchisor aspires to expand his business in the international locations besides running a successful franchise business in the domestic market. Franchise business owners in India are overwhelmed to be approached by entrepreneurs belonging to other nations. In their enthusiasm of expansion abroad Indian franchisors fail to check the credibility of the aspiring franchisees abroad. Without taking into account their professional backgrounds and the viability of their brand internationally they sign franchise agreements.  Also at times risk of failure is highly predominant as a franchisor is not well-aware of different franchise rules of the foreign markets. The article deals with the concept of expanding the franchise business internationally while carefully suggesting steps for guaranteed success of the franchise business.

Steps ensured before flying overseas

Franchisors who want to establish themselves in other nations need to be sure of their success as the future of the brand depends upon this crucial decision. Regarding this Major KV Rajan, Executive Director, Amoha Education (P)Ltd (Veta)said, “All franchisor aspire to make their brand world famous but need to keep in mind the success of their brand in the home country before taking this big leap.”

Here are a few steps that must be followed before venturing into foreign markets with a popular or even a developing brand:

Foray in to friendly nation: As Rajan says, “The first and most essential criterion is to select countries which have friendly relations with the home country.” Foraying into a country with friendly relations makes it easier to get a license with lesser hurdles. For example China offers an enticing market but has a number of hurdles to entry that are not easy to overcome for Indian franchisors.

Knowledge of franchise laws in selected countries: Franchisors need to have an in-depth knowledge of the franchise laws of a particular country where he wants to initiate franchising. Rajan states, “Malaysia as a country has well-defined franchise laws which make it easier to franchise there.”

Successful domestic franchise network: A franchise business opportunity essentially requires successful franchisees for strong franchise network. Franchisor should at least include 50 franchisees in his home country’s network before making it international. This is not a strict requirement but a good number of franchisees indicate the franchisor’s experience and success in the business.

Information of tax and revenue: Before initiating franchising, a franchisor needs to be well-aware of various taxes and revenues of that particular country. Countries having high franchise taxes should not be usually targeted in the beginning of international career.

Feasibility of concept at foreign locations: Before a franchisor starts dreaming about taking his business abroad, he should be sure that the franchise concept can be successful in other countries also. Maybe a concept which is popular in the home country may have lesser appeal for people settled abroad. Local customs and preferences of people go a long way in spelling success or failure of any business.

Well-trained franchisor staff: The new franchisees of any foreign nation may not be aware about the franchisor’s business concept as well as working style. Therefore, competent franchisor staff will help to implement, train and support the new foreign licensee. Supposedly an Indian food restaurant franchise owner takes license for giving franchises in USA. The Master Franchisee of his brand in USA may not be well versed with the Indian cooking style and recipes. At such times, the franchisor needs to have experienced and well trained staff.

Up-to-date operating manuals: It is usually seen that few Indian businessmen consider it a compete waste to invest in modern machinery, operating and marketing manuals. However, before venturing into any foreign location, franchisors need to renew the machinery and manuals according to latest versions. There should be marketing materials that can be adapted and translated for use in other countries as well.

Analysis of competition in particular concept: Before setting up outlets in abroad, franchisors should necessarily perform a competitive analysis of target countries to determine if the franchise will face competition. A lot of competitors in a particular concept are a good sign for the franchisor as it shows that there is a demand for his concept in that country.  Unique way of presenting his product or service can make him a strong competitor in that market.

Seek advice from experts: It is important to take advices from franchise consultant or advisors who have a rich experience in international franchising and licensing. Being a novice in international franchising, franchisors can stumble in making decisions. Relying upon experts can however help in finding prospective franchisees and  negotiate profitable agreements.

Registering trademark: Before implementing an international launch, franchisors should apply for registering their trademarks and brand’s logo in the business association of the country where they want to enter. Crossing all such government hurdles is better before starting the first franchise outlet.

Do not expect wonders: Franchisors should patiently wait for their brand to get successful in foreign markets. They have to invest a great deal of time and efforts in the franchise process before hoping to receive a high licensing or franchise fee from new franchisees.

To summarise, expansion of a franchise business internationally must be based on well researched plans. A single mistake on the part of franchisors can dampen performance both in foreign as well as domestic market.

Related: Drawbacks of guaranteed financial success

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