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International franchising: don't put the world on your shoulders

For all of the talk about the economic meltdown, many franchisors are still successful and  currently eyeing new opportunities. For the truly ambitious franchisor, an international leap remains a tantalizing, and potentially lucrative, challenge.

An interesting article in the latest issue of Franchise Times recounts the discussions that took place at the Faegre & Benson International Summit in the  Twin Cities late last year. Many of the pertinent aspects of bringing a franchis outside America were talked about, and they’re worth a second look.

The first thing franchisors eyeing an international move should keep in mind is that such a big endeavor should not be used to mask business problems at home.

"International won't fix domestic problems or generate enough cash," warned Kay Ainsley, partner with Michael Seid & Associates (MSA). "That one-time fee goes to the bottom line (just) one year."

Equally, patience in an international launch may bring its own rewards.

"When I was with Domino's, we'd let Pizza Hut go in first and educate people about what pizza is and then we'd go in and say, 'we deliver,'" she said.

The article points out these other questions that franchisors must ask themselves before opening foreign branches:

  • Is there a demand for the product?
  • Can the ingredients be sourced locally?
  • What will it cost to go there?
  • What will the market look like?
  • Do you want company units?

Also worth considering are subtle culture differences that may make the difference in your company’s success. Mo Sawda of Buffalo Wild Wings described a moral problem his company faced when it eyed expansion in Saudi Arabia. The Middle Eastern country bans females from eating in restaurants, but the Buffalo Wild Wings president is a woman. What's a franchisor to do? It’s likely foreign franchising will throw up similar conundrums when you plan to expand.

The overarching sentinment from the summit seems to be that international franchising, if done properly, can be profitable and fulfilling. Franchisors, though, are strongly urged to do as much homework as possible before making the leap outside of North America. It’s a big world out there, and educating yourself is the only way to guarantee your future success.

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