According to Franchise Times, for the average franchise system at least 1 out of every 3 locations is outside the United States (36.3% of its total units).
The rate of international franchise expansion has increased steadily for over a decade and may be a sign of market saturation. The U.S. is the largest franchise market in the world, while franchise markets in numerous other countries are still developing. Expanding into emerging markets provides U.S. franchisors a prime opportunity to stave off earnings volatility. Consider the case of KFC. The chicken fast food franchise has been enduring a rough patch at home, but flourishing elsewhere. In fact, more than 75% of KFC’s franchises are located outside the US.
While the criteria for international expansion varies by franchisor, there are some common tenets any domestic franchisor should heed before moving forward. What should franchises do to prepare when going from operating in solely the U.S. to operating in any other country as well (and vice versa)? International franchising expert Philip Zeidman of DLA Piper gave us some wisdom on what to do in order to make the jump of national to international a success:
1. Make sure your house is in order at home.
2. Don’t begin to expand until you are satisfied that it will not drain away so much of your resources that you cannot continue on a clear growth pattern in your home market.
3. Be sure you know what the market is for your products and services, and whether there is a demand for them in markets other than your own.
4. Identify those markets which are most likely to be receptive, and begin there.
5. Have as clear a business plan as possible, rather than simply responding haphazardly to expressions of interest.
6. Make sure you have adequate capability to undertake this quite different set of responsibilities than those to which you have been accustomed.
7. Give a lot of thought to how you will structure your arrangement, which may not necessarily be the same as you have been accustomed to doing.
8. Finally, and most importantly, do your homework. Then go back and do it again.
Thank you Mr. Zeidman for his expertise! He was also nice enough to expand on some key points of international franchise expansion, including hot spots and trademark protection. That conversation can be viewed here. Also, Mr. Zeidman can be reached at 202.799.4272 or by email at email@example.com.