FRANCHISE EXPANSION
GlobalFranchise.Net - news staff writer
2011-03-25

Why not to consider an International Franchise?

"An increasing number of businesses are grappling with the challenges of global expansion these days, as investors from the Middle East, Asia, and South America seek out U.S. brands and retail concepts to develop in their home markets. In a recent survey of franchise businesses by the International Franchise Association, or IFA, more than 75 percent of companies—the majority of them U.S. based—said they were planning to start or accelerate international projects over the next year" writes Ryan Underwood's for Inc Magazine online edition on Feb 1, 2011.
But is it really a good idea for your franchise to take a chance on these new frontiers? According to Rosemarie Hartnett and Mary Rogers, co-founders of Abrakadoodle Remarkable Art and Creativity Programs, a franchise for children that has established international programs in Asia, including Singapore, Malaysia, Japan, China, Macau and Indonesia, "four questions to consider before you jump in with two feet:"

Are you able to adequately protect your intellectual property?
There is probably no place that you face a greater risk of having your intellectual property highjacked than several thousand miles away in a different culture with perhaps even a different language. How will you even know if this is happening? Are you prepared to protect and defend your IP if it is stolen? Anyone in the international marketplace will probably tell you that they have had a trademark stolen and held hostage or copyrighted content lifted and used illegally or a trademark registered without approval. You need to be prepared and ready to handle these problems, if they arise.

Can you really support your international partners?
International partners need a lot of help and support. Often there are language issues making training and support issues more challenging. Do you have the support services in place and functioning well enough to help support these investors in your concept? Then there are the inevitable time differences to consider. Do you have support team members who can work nights or early mornings to support international partners during their business hours?

Do you really know who would make a great partner?
Often, prospective international franchise owners seeking franchise rights approach smaller companies. But with just one or perhaps a few licenses to sell per country shouldn’t you be seeking the right partners instead of waiting for someone to knock on your door? First, you need to really consider the qualities and requirements that you are looking for in an international partner. Secondly, you’ll want to consider how you might find these great partners. And thirdly, once you locate what appears to be a suitable candidate, you’ll want to conduct thorough research to make sure that the candidate has the skills, background and resources to not only get the job done and but also work collaboratively with you and your team members.

Are you prepared to comply with franchise regulations in other countries?
As franchising grows and matures internationally, countries around the world have begun to regulate its expansion. Which country requires a disclosure document to be registered before a franchise agreement is executed? Do franchise documents need to be translated? Does the franchise company need to apply for the right to offer franchise opportunities as a foreign franchise? And what about the royalties? Emerging markets in the Asian region are often bound by government restrictions regarding the movement of currency outside its borders. Is there a restriction on the amount of royalty payments that can be paid to a foreign franchise?

Where to Go
Publicly traded and private companies find suitable and profitable international markets to thrive in through acquisitions, licensing, joint ventures, partnerships and distributorships. But where to go? According to William Edwards of Edwards Global Services, country GDP growth rate is a good indicator.
“The higher the GDP growth rate, the more investment is being made in a country. Experience over the past three years indicates this is also a good measure of whether local companies are open to new franchise investments.
The key international markets that are expected to have strong franchise growth in 2011 include:
• Brazil–Strong growth, high level of local franchising
• Chile–Small, but sophisticated franchise market
• China–Focused on many cities with a population of 5 million or more
• Colombia–Strong desire for U.S. food brands
• India–Strong desire for food and retail brands
• Mexico–Region–specific franchising opportunities
• Middle East–Specialty food and retail
• S.E. Asia/Indonesia and Malaysia–Special niche brands
• South Africa–Service sector franchises
• Vietnam–New emerging market with a strong food sector need

What Franchise Sectors Are Drawing Interest
Franchise sectors getting the most interest on the international front include:
• Automotive–Aftermarket products and services
• Education & Training–Management & children’s products and services at all levels
• Commercial Services–Facility management, cleaning, handyman, security
• Personal Services–Handyman, maid, mobile, home health care
• Specialty Food & Retail–Mall anchor concepts, special clothing brands, theme brands, ethnic foods, well-known chicken, dessert and pizza brands”.

Sources:
Where to Take Your Franchise in 2011 - http://www.franchise.org/Franchise-Industry-News-Detail.aspx?id=53245
Four Questions to Consider Before You Go International – http://www.franchise.org/Franchise-Industry-News-Detail.aspx?id=53324
Should You Consider an International Franchise? – http://www.inc.com/magazine/20110201/should-you-consider-an-international-franchise.html