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International Franchising--Global Growth of Franchise Businesses

Pizza in Kuwait... Gap jeans in the Phillipines Gourmet Burgers in Turkey-these are just a few examples of how international franchising is growing at a tremendous rate. US-based Pizza Inn is expanding into the Middle East and Asia. The Gap is opening eight stores along with four Banana Republics in the Philippines. Carrefour, a popular French food retailer, is launching operations in Poland. And the UK-based Gourmet Burger Kitchen will soon be selling its tasty wares in Turkey.

International franchising is growing at a tremendous rate, with opportunities all over the world. US companies have excelled at expanding their operations overseas, relying mainly on Master Franchises. The Rosenberg International Center of Franchising in conjunction with the International Franchise Association Educational Foundation recently surveyed US franchises about their international expansion and found that over 50 percent had opened units outside of the states, with nearly 30 percent of the outlets being located overseas. That expansion into international territories represents close to 20 percent increase in international operations over a ten-year period.

The global economy is making it possible to sell just about anything anywhere in the world.

International franchises tend to be structured in one of several ways:

  • Direct Franchising: this is a straightforward traditional arrangement in which the franchisor grants rights directly to a franchisee in another country. Direct franchising is usually applicable to one outlet or sometimes several units within a designated territory in the foreign country. These opportunities are most commonly developed through a Master Franchise license holder.
  • Master Franchise: a Master Franchise license generally maps out a specific area for development within a country – for instance, different counties in Ireland or provinces in Canada could be grouped together to make one large Master Franchise territory. The holder of the Master Franchise license collects fees from the sub-franchises developed in that territory. Master Franchise licenses are the most common in international development. It allows a Franchisor company located outside of a country to work with a local business person to develop the territory. Many governments now recognize the economic value these arrangements can bring to a community, and are making it easier for Franchisors to establish and grant exclusive rights for a master territory.
  • National Master Franchise: the Franchisor company grants the right to develop all the territories and multiple franchise units within one country. This is similar to the Master license in that the holder collects fees from establishing sub-franchises, except it is on a national scale for an entire country.
  • Joint Venture: the Franchisor forms an alliance with a business partner in the foreign country. This type of business contract usually stipulates a joint financing arrangement. The on-site partner, familiar with the local customs, language, and laws, is responsible for the groundwork entailed in establishing sub-franchises or a chain of corporate-managed outlets.
  • Regional Corporate License: a country is divided into regions, but there is no sub-franchising. Instead all franchise development is done through corporate investment, overseen by the holder of the Regional Corporate License.
  • National/Multi-National Corporate Developer: Since this arrangement requires substantial capital, it is only for large corporate entities with the resources to fully saturate a given market. The developer typically agrees to and is bound to open a given number of storefronts within a certain time period in order to retain the exclusive rights conveyed by this agreement.

The opportunities are in international franchising are astounding, and those who are first to open a franchise in a new market often stand out as new and different – a terrific competitive advantage. So for those who are business savvy, and have a hankering to introduce new products and services to an area, consider the possibilities of international franchising. Check out this link to see what types of franchises are available for international development:

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