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Franchising is a business format with American roots that has grown globally by a considerable amount, particularly in the past couple of decades.

Consider this, fifteen years ago relatively few franchisors were operating internationally, and the ones that had gone International were typically the large-scale ones. Nowadays, 32 percent of the franchise units operated by the top 200 franchisors in the United States are located outside of the U.S. That number represents a 33 percent jump in the number of international units operated by those franchisors in the past 10 years.

In addition to the United States, countries such as England, Australia and Canada have found a high level of success in spreading their franchise concepts domestically and around the world. And additional players like France, Spain, and Germany are getting into the international franchising game, and also experiencing marked success.

With the launching of our new franchise portal for Mexico within the past month (and another soon launching for South Africa), it’s obvious that a worldwide financial malaise hasn’t stopped the growth of franchising. But where are some places where franchising may “boom” next?

The U.S. Department of Commerce estimates that over 75 percent of the expected growth in the world’s trade over the next two decades will come from developing countries, specifically emerging markets. Eighty percent of the world’s population lives in these emerging markets, but they currently only combine for an estimated 25 percent of the world’s gross domestic product.

When you hear the phrase “emerging markets” typically the first countries to come to mind are the larger ones such as the “BRIC” countries of Brazil, Russia, India and China, along with maybe a couple others. However, smaller countries have future growth potential that simply shouldn’t be ignored.

Many of the countries that warrant consideration are part of regions once unified, but have since dissolved into historically-new entities. Places such as the former Soviet Union, former Yugoslavia, and other countries in Eastern Europe fit into this description.

According to the East Europe Franchise Association, the region – that also includes some countries geographically located in central Europe as well – is a vast and emerging marketplace for franchising consisting of 30 countries with over 450 million people.

So where are the main growth areas within this vast and emerging marketplace? Kristin Houston, leader of the U.S. Commercial Service Global Franchise Team, points to the countries of Ukraine, Slovakia, Poland, Hungary, and the Czech Republic. These five countries have grown 67 percent in the last three years alone. The sectors of retail, automotive services, real estate, education/training, hotel and hospitality, and quick-service restaurants are currently the most in-demand franchise areas.

Here are some additional quick facts on the franchise landscape in these specific countries:

Ukraine

• Around 42 percent of the Ukrainian franchising market consists of non-Ukrainian franchising brands
• Fast food is the predominate franchise industry in the country
• Some areas Ukrainian franchising businesses have been successful in include office supply delivery, outsourcing services, staff and management training, copy and printing services, and translation services
• Other franchise sectors with a strong base in the country are in customer service such as cleaning and washing services, repair, tourism, ticket delivery, organization of entertainment, etc.
• Banking and financial-related systems are newer areas gaining traction
• Franchise relations are regulated by the Civil Code of Ukraine and the Commercial Code of Ukraine, with special chapters of these acts dedicated to franchising
• Hotel and hospitality is highly regarded as a future growth area

Slovakia

• There are over 100 franchising models are present in the Slovak market, of which about two-thirds are within the retail trade sector and about one-third in services
• The Slovak Franchise Association has adopted the European Code of Ethics for Franchising
• There are currently no specific regulations in Slovakia in regards to franchise agreements

Poland

• Has some of the most developed franchise systems in Eastern Europe
• There are over 300 franchising brands in Poland and more than 13,500 franchising outlets
• Around 30 percent of the franchising systems in Poland come from foreign countries with most foreign-based franchise systems coming from Germany, France and the U.S.
• Popular franchise sectors include the following: textiles, retail food sales, professional development services, body care salons (hairdressers’ services and beauty salons), fuel stations, financial services and fast food
• The majority of regulations applicable to franchise agreements are found throughout the Polish Civil Code, the Commercial Companies Codes, the Act on Abatement of Unfair Competition and many other laws since Polish law does not specifically regulate franchising agreements

Hungary

• The Hungarian franchise market consists of approximately 300 brands, 50 percent of which are Hungarian owned
• The other 50 percent of the Hungarian franchise market are either subsidiaries of international companies or Hungarian master franchisees
• Some of the first franchises in Hungary included popular hotel chains and fast food franchises.
• Several Hungarian franchise companies are active internationally.
• Under Hungarian law, a franchise agreement is considered an atypical agreement, and neither any specific law nor the Hungarian Civil Code regulates these agreements

Czech Republic

To fully find success internationally, a franchisor will have to adjust and adapt their model to not only the regulations (including currency exchange and tax laws) of where they desire to operate, but also that area’s language, working hours, and culture.

In addition, the fact that there are few established franchise laws in many of these countries shouldn’t discourage franchisors from establishing outlets in these countries. Organizations such as the International Franchise Association and the International Trade Administration branch of the U.S. Commerce Department offer franchisors who seek to operate internationally many of the resources needed during the process.

Also, although they are becoming more financially-sound and developing a stronger middle class, these countries still haven’t been cultivated by a high number of franchisors. Consequently, hopeful entrepreneurs within these countries are generally eager to learn business principles through the methods and procedures franchisors have to offer.

Franchise businesses have quite a bit to offer emerging markets because they are designed to be replicated. Thus, they require less experienced entrepreneurs to begin, and provide business-learning opportunities within a support structure. All of this can help emerging market countries further develop their economies.

According to Houston, “95 percent of the world’s potential consumers are beyond U.S. borders.” Going International is a way for franchisors to sustain growth opportunities for their business for years to come, and it wouldn’t be surprising to hear of major franchise growth in the East Europe region in the not too distant future.

Sources: Franchising World Magazine (March 2011), U.S. Commercial Service, East Europe Franchise Association, International Franchise Association, Australian Trade Commission

Franchisors are becoming more flexible with the opportunities they are offering in the face of an economy struggling with large unemployment and reduced lending facilities.

As well as their ‘Original’ franchise opportunities, many franchisors are offering small and medium sized packages to cater for everyone.

It’s never been such a good time to start a franchise business with franchisors offering great value opportunities.

At the Salon Internacional Franquicia (International Franchise Exhibition) in Valencia, Spain last week Franchise Belen talked to a wide range of both small and large franchisors including Tailor &Co, Gelatiamo, Orocash, Piel de Toro.

“With unemployment in Spain at nearly 20%, starting a franchise is a real solution to getting people back into the work force. Franchising can be part of the solution to help people who have lost their jobs get their lives back on track, and become a business success” said Belen.

With the banks providing less funding for start-ups, franchisors are also considering wider markets, which is showing in the success of Franchise Direct’s Mexican website which has just launched.

Franchisors realize the site, which features a wide range of Spanish, Mexican and International franchise opportunities will be an invaluable tool to those seeking to be financially independent and successful in business.

The exhibition, which featured nearly 200 franchisors, consultants and industry experts, was busy, despite difficult economic times. The Spanish government has also increased the funding and support programs available to those who want to be their own boss, in reaction to the reduced finance available through the banks.

With less funding available to start-ups, potential franchisees are spending more time carefully researching which franchise opportunity is most suitable to their own needs and desires.

Visiting an exhibition often makes people more interested in starting their own websites, and Franchise Direct provides comprehensive details for franchises available throughout Spanish speaking countries, North America and Europe, with nine international websites.

Other franchisors who shared their views at the exhibition included:

• Administración de Fincas LDC
• Almeida Viajes
• Marco Aldany
• Vellatelia
• Piel de Toro
• Bioenergy
• Publipan
• Mundoguía
• Gelatiamo
• SinTabac
• Tailor & Co
• Men Ceremonia y Moda Hombre
• Orocash

Franchise Direct has invested a serious amount of intellectual energy in trying to provide an accurate state at the international franchise market. In today’s blog, we’d like to deal address an intriguing aspect of the international franchising: recruiting top talent.

Opening a franchise in a new country is challenging undertaking, as we all know. You will have to adapt your franchise brand to an entirely new culture, not to mention a different economy. But perhaps even more complicated is the process of employing talented executives who you can trust to lead the expansion of your franchise brand.

We’ve been considering this issue after reading an article from Bloomberg on the subject. They quote the example of Domino’s, who spent six months headhunting and assessing resumes before they employed Richard Allison to be its new international executive. The story also quotes executives from Popeyes and Dunkin’ Brands who are currently searching for new international executives to field their foreign division.

The truth is, there aren’t many people qualified for such positions. American executives are by nature well-versed in the goings-on in the North American economy who know nothing about franchising regulations in Singapore or Indonesia.

“You can’t go in with a standardized product or platform. You’ve got to go in with localized knowledge ” Jack Russo, an analyst at Edward Jones & Co. in St. Louis, told Bloomberg. Attracting that localized knowledge is a challenge, especially as franchises continue to woo foreign markets in the face of stagnating prospects at home. By the end of this year, there will be more Domino’s Pizza franchises outside of America than in America.

In turn, the demand for executive-level expertise on international franchising has never been higher.

Diana Thurmann of Franchise Direct spent some time in Iceland this summer. On the blog today, she describes the role of some of the world’s biggest franchise brands play on this tiny island nation with a population of 320,000.

Being successful in Icelandic franchising isn’t easy. In the wake of the country’s economic meltdown in 2008, McDonald’s decided to close its Icelandic restaurants because the cost of operating their were prohibitive. Diana did find three huge franchise brands - Domino’s and KFC - enjoying some success there.

KFC in Iceland:

In many countries there is something that reflects the culture at local franchises. In Iceland, you’ll find chicken back and cocktail sauce at KFC.

Subway in Iceland:

The first Subway restaurant opened in Iceland in 1994. Subway has seen the joy hungry Icelanders want to take a loyalty and sweet fast. The Subway pioneer in Iceland was Skúli Gunnar Sigfusson. He established that first restaurant in Faxafen, Reykjavik. He had encountered Subway as a student in Phoenix, Arizona in the U.S. but he was fascinated by the business inside and of course, he felt the food was great. Now, there are 19 Subway locations in Iceland: Reykjavik, Keflavik, Akureyri, Hafnarfjordur, Reykjavik, Mosfellsbær, Selfoss Akranes, and most recently in Egilsstadir.

Domino’s in Iceland:

The first store Domino’s Pizza Island was opened on August 16, 1993 in Grensásvegi 11 in Reykjavik. Operations have been successful from the date of opening, and the company has grown rapidly since then. Today, Domino’s Pizza operates 14 stores in this country. Seven of them are in Reykjavík, one in Gardabaer, Hafnarfjordur and two in Reykjavik. In addition, one site in Madrid, Akranes Keflavik.

In addition to these 14 stores are Commodity Processing Ltd. Terminal for shops and business center, taking customer orders over the phone. Commodity Processing Ltd. Helpdesk and its business offices are located at Lóuhólum 2-6 in Reykjavik.

Domino’s Pizza in Iceland aims to be a leader in the fast food market. Their main goals are image, service and quality that contribute to their customer satisfaction.

Great emphasis is placed on working always with top quality ingredients and high quality products. Stability is important in this respect and the client can expect to receive the same or similar quality products, even if they are bought at different times and in different retail outlets of the company.

Perhaps because Franchise Direct is such an international organization - with websites assisting franchising in seven countries on top of our European site - this blog always takes a huge interest in international franchising matters.

By following the global media, you receive one general story about international franchising. That is about the international fast food franchise that is thriving in the Far East. This story is based on truth, absolutely, but it’s not the whole story. There are other kinds of franchises that thrive abroad. Just consult with our Top 100 Global Franchise list.

I was struck by just how diverse international franchising can be when I read a story in the Wall Street Journal about the success of Abrakadoodle in the Far East. On the face of it, Abrakadoodle seems like a niche franchise - they provide art and creativity classes to children. In fact they were experiencing limited growth in the US and decided to look further afield. They were drawn to Asia because of the following three factors: “1) parents were spending discretionary dollars on services for their children and 2) there was a keen interest in investing in education and 3) companies and individuals were eager to invest in a solid franchise opportunity”.

The move abroad has sparked a resurgence in the franchise on the whole, leading to “an increase in system-wide revenues from $3 to $5 million and has an increase in the number of franchises from 50 to 79. Franchise sales in the U.S. have also rebounded. We are on a growth path again.”

It’s a massive leap heading abroad, but as Abrakadoodle show, it’s a risk that can often pay off.