5 STEPS TO INTERNATIONAL FRANCHISING
Franchising is the method for growth, also internationally. In the last 15 years franchising has become more and more international as franchisors all over the world have started to see its’ benefits to gain international presence. After the Covid-19 the international franchising is booming again and hundreds of franchisors all over the world are looking for international growth at the moment.
To start franchising is a big step for any company and to start international franchising is at least 5 times more. This is why it should be prepared carefully before any actions. If you are thinking about to franchise internationally, please take a look at these 5 steps first:
1. Prove the concept and protect your brand
Franchising is about transferring know-how which comes from the real life experience. The concept has to be tested properly on the market before it is franchisable. Especially, when you plan to take your concept to another country, your relevant market experience will be questioned. If you’ve only got one unit serving local customers only in one town, it might be too big step to jump into the new country immediately. But if you have already taken over the whole country and you might already have some brand knowledge amongst foreign customers, it will be much easier to cross the border.
In franchising; franchisor company gives the right to another company (franchisee) to do business using franchisor’s concept and brand as we all know. Before you start to grant the rights to anyone, make sure that your brand is protected and owned by you in the market you are going to do business. To register your trademark(s) is a minimum criteria for this but typically there are some other brand elements (like domains or slogans) you should protect before entering the new country. These actions might take some time (typically 6-12 months) so, start them well before you plan to start business operations in the market.
2. Know your target market
In the most cases customers or clients in the new market area does not know you or your brand yet. But in all cases you have to know about them and other players in the target market. It is very important to do a proper Market Study before the decisions about entering a new country or region. First of all you have to know if your concept would be suitable for the market. Are there potential customers/clients enough for the products or services? Are they able or have they got used to buy the kind of products and services your concept is offering. Or should you even create a new consumer habits for the market? If market research would tell you that you should change many issues, selection of products/services, methods or tools in your concept, there might be too risky to enter the market. Usually, the best new market is the one in which you don’t have to do any big changes for your concept.
Of course, also other stakeholders are important to search, analyze and get to know. Depending on the business these may include product and service providers/distributors, landlords, shopping center owners, trade unions and even officials. Also, key competitors for your concept and franchise must be surveyed and analyzed (their strengths and weaknesses). And don’t forget to check the relevant laws and regulations (incl. tax regulations) of the country/region.
3. Do your homework
Although franchising is often thought as less-costly and less-risky growth strategy, starting international business is a big investment also for franchisor. You don’t want to go there just for fun or to test how fun it is. You surely want to make it successful. This is why you should plan your international steps very carefully.
First, it is recommended to do a comprehensive International Franchising Business Plan. This means not only setting the targets but thinking about the strategies and making good action plan. Normally, franchisors have to also go through their franchise packages/programs and adapt it for the new market. Talking about strategies, international franchisors have to plan for example the method for market entry well – will they enter the market via own sister/daughter company or with a local partner. Local partner may be joint venture partner, area developer or franchisee. If you’ll end up making co-operation agreement with a franchisee, you have to decide will it be a single, multi-unit or master franchise agreement.
A part of your homework is to train your team for the international business. Although the principles of franchise network management are pretty much similar in all over the world, local cultures vary a lot. Over all, you have to learn the new market pretty well to be able to manage your partner in co-operation. You have to show the commitment to the partnership and especially to the new market area. Make sure that everyone in your company (especially including owners and top management) are committed in the long-lasting investment to build up the constant business and deep partnership in the new area.
4. Invest in to start the job
International franchising business is never for “quick buck” and there are no free lunches. You have to invest in time and money for the development and start-up. You are developing yourself and your business from local to global. Be sure that you’ve got resources to do it properly. Many international franchisors have said that it was ten times more expensive to start international franchising than local one. There was more travelling, more telephone costs, need for system development, larger trademark registration fees and so on. You don’t want to make mistakes which are more costly than in local business environment. Plan your international franchise business well and be ready to invest in it. Don’t try to look for shortcuts to heaven. There are none.
Also, as you are entering the market, you cannot wait positive results if you are not ready to invest in the market actions at all. For example, it is necessary to invest in brand protection, market research, materials, partner recruitment and brand knowledge development. You cannot wait that your local partner (if you’ll find one) will pay the whole cake. For example, if you want some franchisee recruitment company to start looking for the franchisee for you they usually don’t commit into the work with success fees only but you have to pay some start-up fees in the beginning of the co-operation. This is also a good way to show that you are serious about entering the market, and not just “fishing some easy catch”.
5. Find local help
To get best route to the new market is to get local knowledge and help. They can take you directly into the right environment to start the most essential actions. There are different kinds of advisors and support providers to work with: franchise consultants, lawyers, franchisee recruiters, brokers, accounting companies, marketing agencies, research companies, real estate agencies etc. Very good source of information is also local franchising association which can link you – for example – to talk with local franchisors. Before you do the co-operation agreement with local advisors/support providers you have to make sure that they really can help you. Check their track record (for example from franchising association or from other international franchisors) and make a good plan for the assignment. You have to make sure that they really are committed to do their best to help you in the market entry. To build up the solid co-operation relationship with a local advisor(s) is a huge resource for you to start your international franchise business successfully.
FranCon Franchise Consulting in your nr 1 advisor in international franchising. We have helped tens of international franchisors to enter into the Nordics, especially Finland. We have also been consulting tens of Finnish franchisors who have taken their first steps internationally. With our large international and national network we can help you to start successful business in Finland or all over the world.
