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Advisory 2009-12-16

To-do-list for going global

If you have the desire to take your franchise business overseas then a franchisor is advised to take a few things into consideration before venturing into the international markets

By Ramanjit Kaur Feature Writer

Franchising is the modus operandi especially, when you are planning to expand your business overseas. Overseas franchising can be highly profitable and an excellent way of expanding the business on foreign land. But it can be risky for an inexperienced franchisor. As Tony White, Director, The White Connection and Regional Manager, Gloria Jean’s Coffees, Australia says, “A franchisor has to do everything carefully and diligently. S/he must have patience as it may take a long time to settle but franchising ensures good results in the future.” Therefore, taking a franchise business abroad cannot be taken lightly. It involves a thorough research of the targeted country in terms of its market size, prevailing trends, details of registrations and legislative requirements for setting up a chain of franchises. Further he adds, the best time to take the business abroad is only when the franchisor feels that he has reached the saturation point or close to the saturation point in his/her own market.

This article has comprehensive information regarding what sort of homework a franchisor has to do prior taking his/her business overseas.

Identifying the countries with best opportunity

Once you have finalised on taking your franchising business abroad the next step would be to trace the country with best business opportunity. A franchisor needs to review the countries s/he is targeting to enter into. S/he has to consider three important parameters to review the potential of the targeted countries in order to achieve success.  The three parameters are:

  • Economic scenario
  • Political environment
  • Developments in the related sector

As Ajai Manohar Lal, Senior Vice President, NIIT Limited says, “The study of economical, political and developmental scenario is done after studying various reports like IDC, Gartner and feedbacks are taken from various technology partners. This gives us details of countries we should be focussing on with respect to new countries to enter and continue focus on existing countries.” Therefore, it is essential to have a careful knowledge of the growth of the targeted country especially in the sector you plan to expand. As Lal says, “We actively interact with various Government, semi Government and private bodies/delegates at various forums to understand the developments in the education sector of the country.”

Understanding the legality and potential of the market

After identifying the country, you need to understand the laws and the market potential.. One must do a detail study of the existing laws of that country. As Lal says, “A detailed market research is a must to understand the potential of the market. It is important to understand the laws also before we enter the market. Understanding of the legal scenario and market potential also helps in framing the business model for the specific countries.”  A wrong business model can create problems in the franchise business which in turn can obstruct efficient working of the franchise. As Lal says, “Since in most cases a franchisee is involved in financing the business. Therefore, it is important that NIIT (or the parent company) is sure of potential and the investments involved.”

Role of franchise consultant

Market research is the most difficult part of expanding overseas. You need to hire a consultancy firm or franchise consultant who can help you in understanding the mechanics of the targeted market. As Lal says, “Franchise consultant can play a very important role in assessing the potential and study the legalities and regulations involved in starting a business in the targeted country.” The consultancy firm is the most economical option to avoid failures of franchisees abroad. These firms typically do feasibility tests for the brand and the business to find out whether the concept is fit to operate in that particular country or not. Therefore, it is always advisable to hire a franchise consultant to avoid later business failures.

The opportunities on foreign land are phenomenal. The only thing required to move ahead is a strategic plan in order to avoid chaotic situations later. Therefore, do an extensive homework before introducing your brand and business to other countries.

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