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Managing International Expansion

As you may know, Franchise Direct operates franchising websites in seven different countries, so we’re particularly interested in the development in the international franchising market.

The Wall-Street Journal has just written a very in-depth article on the state of the global economy and how this will affect businesses eyeing international expansion, including franchises. This article offers comprehensive analysis of where the global economy is heading. The story describes global growth as “uneven”. While China and India have shown nearly no negative signs of the global downturns, other big economies continue to stall.

The story lists franchises like Yum! Brands and staffing business Manpower who are rapidly expanding overseas. We’ve discussed Yum!’s growth in China earlier this week – “YUM!, the fast food chain, will build roughly 900 KFC, Pizza Hut and Taco Bell restaurants this year; 80% of them will be in emerging markets” – and Manpower says “95% of its new office openings this year will be in emerging markets such as Poland, India, China and Vietnam, 100 to 125 new offices in all.”

So, more than ever before, the international move is on for franchises, and the developing world is the destination. But the WSJ does a good job warning readers and potential investors about the hazards of international expansion.

While enjoying the fruits of rapid growth, developing countries face perils from this period of unbalanced growth. One threat is overconfidence, a key ingredient in the technology and housing bubbles that plagued the global economy during the past decade and in the financial excesses in Asia in the 1990s.

"The euphoria which was there among the emerging countries, especially China and India, is going to be tempered a little by concerns about overheating and concerns about asset bubbles," says Nariman Behravesh, chief economist at IHS Global Insight.

If you balance the postives with the negatives, international expansion could be right for you.

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