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November 2005 |
Volume 6, Issue 11,
Part 2 |
Indeed, it is tantalizing for American franchise companies to consider the plunge
into international waters. The idea is glamorous and exciting, but before you
pack your bags and dust off your passport, there are some things you need to consider.
Foreign cultures operate differently and may not respond to your product or service
the same way that Americans do. Do you know what needs to be done to successfully
transfer your franchise concept to foreign markets? In this issue we continue
our insider's view of taking a franchise international as we speak with Ed Teixeira
of FranchiseKnowHow.
 Ed
Teixeira is the President of FranchiseKnowHow, a franchise consulting firm and
COO of Bridge Business Franchising, a business broker franchise. He has many years
of hands-on experience with international franchising. Teixeira says that when
he takes a franchise company overseas, it starts with a conscious decision. "We
decide to go international when we feel that the company is able to provide the
support, the know how, and the services that someone in another country would
require to be able to bring the system up to standards and successfully launch
our program adapted for that country," says Teixeira.
There is a common mistake that American franchisors make. "US franchisors are quite often reluctant to invest the time and effort to analyze the markets or even take a trip to the country where they want to do business," says Teixeira. "The exceptions are the giants like Pizza Hut, KFC, Subway, and UPS. They have not only the inclination, but the resources and the interest to go international on a full time effort," says Teixeira. It seems many small and medium size franchisors expect to continue doing things as they've always done them domestically. Teixeira continues, "The typical franchisor doesn't want to spend a great deal of time and money in exploring international opportunities. They prefer that someone from another country be willing to invest their own money and time to import that US franchise concept into their country."
Teixeira says there are some key points to consider before going overseas. First,
the US franchisor must have a concept that is going to work in a given country
or region. For example, Teixeira says, "It is well known that the Japanese don't
have a sweet tooth so Dunkin Donuts is not going to succeed in Japan like it might
elsewhere. On the other hand, in the Middle East, there is a demand for certain
kinds of confectionaries. Carvel Soft Serve Ice Cream is really popular there."
But market trends are not always so obvious. "In China, it can get confusing,"
says Teixeira, "because the population is huge and diverse. So you have Häagen-Dazs
doing very well in China even though one might not naturally think it would. But
generally in Asia, Japan has always been the bell weather for American concepts."
Secondly, the franchisor has to be committed to its plan for international expansion. "The management or the senior leadership of the US franchisor has to provide a mandate throughout the organization that this is something that we want to do and that I expect everyone to be pulling in that direction. In my experience in running franchise companies," says Teixeira, "I know that the president of the organization may want to export the franchise to another country, but others - perhaps the people in the franchise development department - may resist the idea actively. They could very well serve to counteract all of the efforts and the strategy of senior management. The leadership has got to make sure that they get everyone to sign on and understand the reasons why it makes sense to go overseas and what's expected of them in their particular role to support that effort."
Expect to make some changes
Teixeira says potential franchisees from other countries will want to know that the franchisor will adapt their concept when necessary. He says franchisors need to understand that other countries are not the same as the U.S. - a basic but often overlooked fact. "There have been US franchisors who have assumed the attitude of more or less 'take it or leave it.' You need to be open minded and not think that because it works in the US it will automatically be accepted in the same form in another country. You have to get past the glamour of it and recognize that it's not going to be as easy as it may seem," states Teixeira.
And finally, there is the need for the organizational structure and the resources to be able to make it work. "A franchisor in the US has to think about who they are going to send over there to help support the effort. Somebody has to get the organization up and running in the new country," says Teixeira, "whether it's to be able to help support them on a regular or ongoing basis. How are you going to do that? In one case, I utilized a franchisee who happened to run a very large franchise and had an interest in going to some particular foreign countries. His organization was well managed so he could leave it for a month or so. I paid him a small stipend and his expenses and we both got what we wanted. Sometimes you have to recruit someone from outside the organization. I recall doing a transaction with a healthcare group in Brazil. I needed someone like a nurse from the US who spoke Portuguese. Fortunately, I was familiar with a certain part of SE Massachusetts and I was able to find someone. That individual helped do the training for us and ultimately moved to Brazil and worked for the franchisee in Brazil for about 2 years."
And now for the payoff
Assuming you do everything right and set down the foundation correctly, what
can you expect? “There are several benefits from going international,”
says Teixeira. “Number one, there is no doubt that it can bring tremendous
financial rewards. KFC earns as much from its China operations as it does from
its US operations. So there could be a big payoff though it might take 2 or
three years to manifest because you first have to make an investment. Being
international also adds appeal and sizzle to the franchise concept. It obviously
helps promote the brand because there is added credibility and there is a perception
that you are more savvy. It also generates enthusiasm among employees of the
franchisor organization. Announcing plans to go international creates that air
of excitement. Then there is the synergism that comes from transference of knowledge.
We don’t know everything in the US. In many cases, taking a concept international
could mean receiving in return some enhancements to the domestic program. They
say that franchising works best because 1 plus 2 equals 5. It’s all about
the synergy of having franchisees and their creativity. When you do that internationally
you gain even more synergism.”
Contact Information: Ed Teixeira, President, Franchise Know How, www.FranchiseKnowHow.com, (631)246-5782.
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