For a franchisor whose network is well-established in its home market, the lure of international franchising can be irresistible. The dream is often made more attractive when individuals or businesses from foreign countries approach that franchisor with the question ‘Can I do what you do in my country?’ Such approaches are fine if they become the trigger for starting to think about an international franchise development strategy, but if they become the trigger for actually starting that development without proper research and planning, then the dream will turn into a nightmare.
Why should someone who approaches a franchisor out of the blue be the right person to operate that system in their country? Indeed, who says their country is right for that system? As one experienced international franchise director says, “If you received an e-mail from a foreign woman who you’d never even heard of, let alone met, saying she is looking for a husband, would you jump on the next plane and go over there to meet her family and marry her? Then why would you do something similar with your business?”
Assuming that they have taken a conscious decision to embark on an international franchising project and are not just reacting to a chance enquiry, franchisors need a plan. They need to establish which markets they want to be in, which of the various entry strategies to adopt for each market, what kind of franchisee they will be looking for, how they are going to market the opportunity to them, then how they will eventually recruit, train and support those franchisees. Over and above all of that, they need to know how much it is going to cost and how long it will take to see a return on the investment.
As with most aspects of franchising there is no ‘right’ answer to all of those questions, but there may be a right answer for every individual business. That’s where experienced international franchise consultants come in, followed eventually by their colleagues, the brokers.
If you are planning to franchise your system into other countries you will first need to know how to structure your international franchise package and how to build your international support infrastructure. Although international franchising has grown exponentially over the last 20 years or so, there are still relatively few people who have been around long enough to know how it all works, and more importantly why it works. Lots of people have now worked in one or two jobs or for one or two franchisors but they won’t know why those businesses worked the way they did, nor why they were or were not successful.
An experienced franchise consultant, ideally one who is a part of a network of similar people in a wide range of countries, will have both the knowledge and the access to wider expertise to assist with preparing a bespoke plan for every client. Once the preparation has been done and the plan and budget are in place, you can move onto how to generate and process enquiries from suitably qualified candidates. So how do the parties to an international franchising relationship meet their ideal match?
The battleground of international franchising is littered with the corpses of inexperienced executives who tried the do-it-yourself approach. Many years of practical experience of helping franchised businesses to move around the world has led me to believe that it will be a much easier process if both parties engage with a network of experienced professional practitioners who are used to working with each other.
The consultant in the franchisor’s home country will prepare the franchise offer package and development plan. They will then work with their partner consultant in the destination country to research the market for the relevant product or service in the target market. Once all parties are confident that a marketable package has been produced, the destination market consultant will trawl their database of qualified investors who have registered to be approached when a suitable opportunity becomes available. Should that database not turn up the ideal prospect, then a bespoke marketing plan using magazines
exhibitions, websites and other suitable media will be established. Sometimes, an executive recruitment service can help to team up serious investors with an ambitious franchise development manager in order to create the ‘dream team’ to develop the new master franchise operation. After all, a good franchisor will want to be convinced that the chosen partner has as many of the necessary resources for success as possible.
Another recent trend has been to invite potential brokers and investors to events where some general educational sessions about master franchising are followed by presentations from systems who are actively seeking master franchisees or developers in the local market. These presentations usually include a short video and are ideally done by a senior executive from each of the systems, not only because they can answer all the questions, but because they can demonstrate true passion for their opportunity. Meeting rooms are made available for post-seminar meetings should individuals want to know more from a particular franchisor at that time.
The next such event is the Global Franchise Forum – Gateway to Europe in Rotterdam in April this year. It will be attended by brokers representing 28 European countries. Attendance by franchisors wanting to find franchisees in Europe, is by approval and invitation only.
Whatever the source of an enquiry, it is more likely to move through the recruitment process if it is professionally followed up and there is a clear process of stages through which it must pass. Needless to say the process will work far better if it is being handled by a broker in the target country who can operate in the native language of the potential buyer and to their local time. Both sides should be looking for positive mutual commitment to building a sound business over many years, and this will involve working together with a common-sense approach to financing, training and support.
The franchisor needs to show evidence of a policy decision to embark on, and properly resource an international development programme; the potential franchisee needs to demonstrate that they are adequately funded and skilled to develop business in their country. Both sides should have input to detailed market research on the product or service as well as considering the potential differences in key ratios such as property costs, wage rates or petrol prices. They should also build in some franchising research; how does the franchising market for potential franchisees differ between the countries and is the proposed fee structure and rate of franchisee roll-out realistic? What about the costs of franchisee recruitment, or local laws and cultural differences that may affect the operation?
The candidate will also want to know about the franchisor’s track record. If the home market is a country that requires pre-contract disclosure for domestic operations, then they should be given a copy of the relevant disclosure document, and contact details for other international franchisees should be provided as a matter of course.
Before even despatching marketing materials, qualifying the potential franchisee can start with simple telephone screening to decide whether there is a good match based on the profiling criteria established before the recruitment project starts. After that, further telephone or personal meetings to help establish that appropriate finance and experience exists, lead up to the all-important Discovery Day at the franchisor’s office in their home country.
By the time the candidate gets to this stage they will need to be pretty well sold on the opportunity because it is obviously a serious commitment to make such a trip. Similarly the franchisor will need to be pretty well sold on the candidate to devote the required amount of time and personal resource to the visit. It would be difficult to achieve such commitment without the involvement of a mutually-trusted third party.
After the Discovery Day, when the candidate returns to their home country, the local consultant can help to keep the impetus going by obtaining feedback from, and providing it to both parties discussing how things went and what outstanding issues need to be resolved. Assistance with development of the roll-out plan and obtaining working capital finance from local banks is an added benefit at this stage, as is access to qualified legal support to deal with negotiation of the agreement.
Of course a franchisor can do all, or most, of the above themselves if they have enough experienced staff and plenty of resources. However, this is rarely the case and the added complication of time differences makes it worse. Having a reliable third party who understands franchising and can nurse both parties through the process can be invaluable.
Brian Duckett is chairman of The Franchising Centre, Europe’s leading firm of franchise consultants, and a director of the British Franchise Association. He has made his living from franchising since 1976, initially as a franchisee, then a franchisor and for the last 20 years as a consultant to potential and practising franchisors.
His firm coordinates an informal network of franchise practitioners, which has representation in more than 40 countries worldwide.
He can be contacted by:
e-mail: brian@ thefranchisingcentre.com
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