Very shortly, we'll be publishing the second annual list of the Top 100 Global Franchises here at Franchise Direct. A lot of work and research has gone into preparing this analysis and we believe it says a lot about the international franchise market in 2010.
Many start-up franchises naturally wonder how to go about raising their global profile to something similar to Subway, 7-11 or International Hotel Groups. While there’s no blueprint for international success, those businesses trying to go global will find wisdom in a new article from the IFA’s in-house magazine.
Journalists Carl E. Zisler and Katherine L. Wallman take a pretty thorough look at the in’s and out’s of international franchising. Probably the best insight they offer is that no two markets are the same:
Expenses and returns differ depending upon the expansion strategy a franchisor selects for use, the nature of the market and the capabilities of the franchisee. International franchise candidates are naturally interested in setting financial terms early in negotiations and memorializing franchise fees in a letter of intent. However, until both parties have researched the market and their costs of fulfilling their duties under a franchise agreement, they should refrain from committing to a fee structure which may bind them for 20 years, if the relationship can survive that long.
There’s some excellent analysis of the evolution of international franchising here. It used to be that most franchises found a master franchises and proceeded from there. While master franchising is still most popular, opening single-units is not beyond the realm of possibility. Joint ventures have also become more common. Every franchisor will have to make this decision of how to expand depending on their own financial specifics, as well as the shape of the market they are moving into.
They also offer some really excellent advice for drawing up a budget. All in all, it’s an excellent article to read in advance of our next Top 100.