Don't get caught in the headlights franchise your way out of the credit crunch
With global markets in turmoil business leaders are faced with new challenges when planning their business development strategies. This is the ideal time to consider using franchising to grow your brand internationally
Regular readers will be familiar with the benefits franchising offers to companies expanding on a national basis, namely being able to share the expansion costs with a network of highly motivated franchisees that are legally bound to operate with pre-determined standards and service levels. Franchising is also a particularly effective means of expanding internationally for several reasons:
Entering a foreign market is a huge leap into the unknown. Franchising allows you to split the financial risk with an investor who shares your vision for the development of your brand in that location. A franchisee investor has a commitment to the success of the business that a remotely based employee lacks. They are more likely to hire the right people and instill the correct company ethics when their own money is on the line.
You still have a business to run in the UK so franchising allows the new overseas operation to run at arms-length, while still allowing you to control the fundamental aspects of the brand promise. Franchising gives you the opportunity to recruit a franchisee who you trust to run your business exactly as you would run it.
Knowing the cultural and commercial peculiarities of the new location is invaluable and key to the success of the brand. Franchising offers the added benefit that the burden of adapting the offering to suit the local market is transferred to the franchisee. This presents huge cost savings for the franchisor, as costs for alternative advertising materials, etc, are borne by the franchisee, although franchisor approval is still required.
Your master franchisee will be expected to recruit, train and support a network of sub-franchisees. You benefit from a percentage of the turnover of the entire network, without the need to hold their hands on an individual basis.
Of course, there are factors to consider before you embark on an international expansion plan:
It is vital that you secure the use of your trademarks in all target countries before you begin marketing your franchise. Just as it is impossible to franchise a brand in the UK without owning the trademark, you must ensure that registration is in place overseas also.
You need to find methods of tracking important information, such as sales data, through robust monitoring systems. Build these into the franchise package from the outset. This will allow you to keep a close eye on the performance of the business and ensure that you are receiving the correct payments from your franchisee.
Your franchise agreement will need to be adapted to suit legislation in the new trading location. Ensure that you select a lawyer with international franchise experience and that they have contacts with legal professionals in the Master Franchise country. A solid franchise agreement that protects your interests is fundamental to the international success of your brand.
As with any franchise network, you need to provide your franchisee with a level of support that justifies their management service fee payments to you. This will include regular visits so you will need to ensure that your UK business can continue to operate when key personnel are absent.
You and your team should be prepared to learn and adapt to different cultures and ways of doing business.
International franchising is undoubtedly a great way to expand rapidly, cost effectively and with reduced risk. At a time when businesses are being forced to take drastic steps to protect their operations, franchising allows you to grow while your competitors stand like rabbits caught in the headlights. Any risk can be further reduced if you ensure that your business and brand are well protected by taking expert advice from the outset.
Written by Tony Urwin