Investing in international expansion requires a significant amount of capital and resources on the part of the franchisor, so it's critical to understand when the timing is right to bring a concept overseas.
At the same time, it’s obvious not all overseas or across-border markets are homogeneous. Expanding in Canada versus China are two vastly different undertakings, especially if you’re a U.S.-based franchise brand. You’ll need to do your due diligence in understanding laws regarding intellectual property and contract negotiations, as well as political and economic stability, local demand for your product or service, supply-side issues and opportunities, and cultural acceptance of your brand, among a long list of other factors.
Here are a few of the most important questions to ask yourself before deciding to grow in international markets:
Have you demonstrated sufficient growth domestically?
If you’re still investing heavily in developing domestically and are working hard to support franchisees in local markets to achieve unit-level performance benchmarks, it may not be the right time to expand through international franchising.
However, if your existing franchisees are demonstrating strong unit-level economics and are generating a return on their invested capital, your franchise system will be in a better position to put your time, energy and financial resources into growing in international markets.
The bottom line is you need to have a track record of profitability in your existing market before considering moving operations abroad.
Is there demand for your product or service?
When analyzing whether to take your concept into an international market, one of the most important factors you need to consider is whether there’s existing or growing demand for your product or service.
While there will typically be some measure of customization of your products and services to fit the local market and culture, the core value proposition your brand offers shouldn’t deviate from what has brought you success domestically. Still, you’ll need to conduct exhaustive market research to solidify your knowledge of the local economy, demographics and psychographics. A franchise feasibility study can help you understand whether your concept will adapt well to an international market, identifying:
- The competitive landscape
- Cultural acceptance
- Potential market size and scope
- Barriers to entry
- Long-term viability
- Scalability of the model
Although you will probably need to slightly modify your concept, you shouldn’t make major changes to your franchise concept to fit an international market; it should present similar conditions to those in domestic markets that have helped propel brand growth.
Are you able to develop the requisite support infrastructure?
As mentioned earlier, expanding internationally is a capital and resource intensive venture. Everything that you put into building your franchise system locally will need to be there for international franchise owners or master franchisees, if you choose to grow through that model. This includes:
- Accounting and legal representation
- Supply chain management
- IT infrastructure
- Operations manuals and support
- Sales and marketing materials and support
- Training programs
- Personnel recruitment
- Research and development
The complexity of deploying these and other assets is increased when developing in international markets. You’ll need to consider whether any or all of these need to be adjusted according to the local economy and regulatory environment.
A master franchisee, who is responsible for helping with franchise development and support within a specific geographic region, can be of great assistance in leveraging their local knowledge to help handle some of these local complexities and can reduce the friction in ensuring new franchisees are adhering to brand standards and are building positive brand recognition and affinity abroad.
Do You Have More Questions?
These are just a sample of the many questions you need to ask yourself when you consider international franchise development. When done poorly, you can dilute your brand and cause harm to the system. Yet, a successful international franchise development strategy can open your concept to an entirely new customer base and grow your brand’s prestige on a global scale.
Whether you are a small business owner thinking about franchising as a growth strategy, or a franchisor looking to continue expanding internationally, the team at Winmark Franchise Partners can help you accomplish your goals.
With 30 years of franchising experience and more than 800 franchise owners representing more than 1,250 locations for five brands, Winmark Franchise Partners can help you grow your brand through sound strategy and expert franchising advice. Contact us here or at (844) 452-4600.