Although it is tempting to go into a foreign country to expand franchise sales and bring in more revenue, without a proper game plan for that expansion a franchisor could be wasting time and money. Why are so Many Franchise Brands Expanding Internationally? *, Where are you in the franchising process? Before expanding a franchise to another country, a franchisor should retain an intellectual property attorney that is familiar with the laws of the country to determine whether a trademark is already registered in that country. It typically involves a franchisor who grants to an individual or company (the franchisee), the right to run a business selling a product or service under the franchisor's successful business model and identified by the franchisor's trademark or brand. The importance of franchising in our economy and to the lives of franchise owners is undeniable. Luke Arthur has been writing professionally since 2004 on a number of different subjects. online franchisees can compete in world markets. The franchisor should also determine whether the United States has an embargo against the target country. The Franchise is the term in the business and refers to those individual who invested their money into any company and become that company's franchisor or investor. If we look specifically at franchising companies based in the US and opening locations abroad as examples, these benefits might include: Allowing a franchisee to live abroad but run a business they already know Providing a franchisee who is from another country the opportunity to work with a US franchisor Setup is already done for complicated logistics of supply chains and distribution abroad Needed adjustments to the business model to make it work for the culture of the new country are already in place. A business owned and controlled through pooled resources by the people who use it is a(n) ______. Entry to New Markets International expansion also means access to more markets means more customers and more sales. Less-tangible factors are cultural influences regarding how franchise sites should be run. Looking for a franchise in Tempe? While they offer local consumers and travelers a taste of Americana, the companies that have had the most success in international markets have also adapted their menus and ingredients to meet the taste preferences of the local consumers, who then become their loyal customer base. He points to a curry pizza in India as an example. 2023 Wiley Rein LLP All Rights Reserved. International Franchising When an American based brand decides to start selling franchises internationally, there are a number of decisions that must be considered first. Entering overseas markets allows faster growth for businesses. International expansion for startups offers a host of opportunities and benefits. A franchisor also must consider the cost of failure and pulling out of a foreign market. Treaties and other international agreements, such as the United Nations Convention on Contracts for the International Sales of Goods, may affect taxation, investment and trademark matters. When mini brands franchise internationally, they do so under one of two circumstances. Can target country currency be invested effectively in the target country? When two firms operating in different stages of related businesses join, it is called a(n) merger. A form of business ownership that provides limited liability, as in a corporation, but is taxed like a partnership is a(n) company. Do residents of the target country possess convertible currency? The United States has enacted laws that may require the franchisor to do additional due diligence regarding the background of prospective franchisees. If not, a franchisor may not be able to expand into that country using their existing trademark. A foray into foreign markets, especially if accomplished before a key competitor plants its flag, can be a shrewd move. International expansion for Walmart, along with other retailers, is now being highly impacted by the growth in online shopping. The contents are intended for general informational purposes. Cybersecurity continues to be a significant threat for governments, businesses and individuals around the world. Because franchises are locally owned , they often play an important role in their communities too. Many words, phrases, logos, and images used within the United States may have secondary meanings in other countries or may be seen as derogatory or offensive. We are also able to provide you with financial assistance, all of the necessary documents, and guidance for developing procedures, operations, and marketing for the region or regions in which you choose to expand. 7.IMPROVE YOUR COMPANY'S REPUTATION. Advertising, training and other support services are made available by the franchisor. 3. International business expansion (or internationalization) is the process of expanding a business from the domestic market into international markets across the globe. While most international expansion initiatives start with high hopes, the reality can be quite daunting. It was followed by 7-Eleven, McDonalds, Dunkin, Taco Bell, Pizza Hut, the tutoring franchise Kumon, Hampton by Hilton, Anytime Fitness, and, at No. Lets look at each of these factors in terms of the advantages and disadvantages of franchise ownership internationally. Franchising Potentials Advantages of Franchising Franchising provides expansion capital Avoids employee related problems Accelerates expansion over wide area Franchisee operators are motivated to succeed Disadvantages of Franchising Sharing profits Loss of absolute control Lawsuits with unprofitable and/or difficult franchisees News feeds are property of the International Franchise Association and are featured here with permission. franchisees pay only a set monthly fee We appreciate your understanding and hope you stay healthy! These are the costs associated with rent, utilities, and other fixed costs. Firstly, make sure that your international expansion is instigated by you, not by somebody else Often, it's a blind approach that can first turn franchisors' heads towards this path. Consulting with risk management and insurance specialists will help the organization better understand and identify its exposures. Our index offers franchise companies a first step in their internationalization drive with the understanding that additional in-depth, micro-level analysis be undertaken for the identified top priority countries to evaluate key microeconomic variables, said RFIC Director E. Hachemi Aliouche in a prepared statement. Immigration laws may pose a significant legal hurdle. Franchises are expanding internationally to access additional "market" that have new customers and to increase their profit potential.. Extending a brand globally through franchising involves low risk, requires minimal investment, and offers a huge upside potential for scaling capabilities. Consider these factors first! Others move into new verticals. This helps to show you are interested in the people. Franchise Brands Continue To Expand Internationally as 2022 Wraps Up Duck Donuts means mouth-watering Cousins Raises Fight As a result of its Catering For a Cure initiative, Cousins Subs. Food and Beverage Chain Mission Statements, Bringing Your Franchise Concept to the United States, How American Fast Food Franchises Expanded Abroad, Most Popular Food Franchises and How Much They Cost, A Review of the Papa John's Pizza Franchise, Domino's Pizza Franchise vs. Pizza Hut Franchise, Everything You Need to Know About Franchises, Requirements to Open a McDonald's Franchise, grow new, future revenue and profit centers worldwide, International Franchising: A Practitioners Guide. Although a trademark is federally registered in the United States, it may not have any protection in other countries. Critical to the success of international expansion is the adaptability of the franchised system, including the products or services, trademarks and business format, to foreign markets and cultures. No statement in this site is to be construed as a recommendation. But all growth opportunities come with risks and expanding abroad is a particularly complex move for law firms. By 2017 it was operating in over 190 countries, and today close to 73 million of its some 130 million subscribers are outside the. Identify Your Product/ Service. Well look at some of the different areas of life where franchises play an important role. We access and process information from these cookies at an aggregate level. Over the last 21 years, BonelliErede has expanded into six countries across three. Since your products, services and customers are unique, you will need to adapt these steps to your own needs when you apply them to your market expansion efforts. The MSA process for market evaluation helps our clients be proactive in marketing their franchise opportunity while not passing up a great opportunity that comes to them. One of the potential problems of expanding into other countries is overcoming the cultural barriers. When do you plan on signing your franchise agreement? Dunkin Donuts. At MSA weve been through these issues and more. Among them are: MSA can provide guidance on recruiting the right international franchisees for the long term success of your franchise system. Rick Hammell of Elements Global Services outlines considerations to keep in mind. Business laws and regulations can vary significantly between countries, provinces, and states and you may find that these differences affect every aspect of your business, including human resources policies, employee rights and benefits, and even the ingredients you can use to formulate your products. The above mentioned factors have more to do with how a franchisor might decide if opening up franchise opportunities internationally makes sense. As in any new international expansion, there will be challenges: cultural differences, legal considerations, contract negotiations, and intellectual property issues, to name just a few. About 30 percent of franchises are owned by African Americans, Latinos, Asians, and Native Americans. The magazine placed KFC at No. Any additional information before submitting contact form. The result of two firms (usually corporations) combining to form one company is called a . There are advantages of franchising to both the franchisor and franchisee, which is why this practice works so well. Together, we continuously strive to support a policy of 'One BrandOne System' in order to be the best pizza delivery company in the world.. According to Freud's view of consciousness, the largest percentage of mental energy is in the _____________. For more informationabout international franchising and development, please contact Franchise Group Chair Bob Smith at 202.719.4481. Additionally, you will want to understand the laws and processes that help you protect your brand, as well as its copyrights and trademarks in a given country. This site uses cookies. Adaptability is crucial. First, bring the focus to different customers in different regions when you create a testimonial or case study. Why is Chick-fil-A Better Than McDonalds? What state is your business based in? Considerable upfront research is required in international franchise expansions. From supply chain disruptions to ransomware attacks, cybercriminals have become increasingly sophisticated and the threat landscape more diverse. Franchises, Strategies That Mitigate International Business Risks. Ready to start looking for your own perfect franchise? Ethical Considerations in International Business. Expanding your business overseas could help you manage cash flow better. 3.NEW CUSTOMER BASE. Franchisors generally have done all the work of setting up business systems, marketing materials, and good location and building requirements, to create essentially turnkey businesses ready to go. He is likely to choose to form a(n) company. Some of these laws may require a modified franchise disclosure document or no disclosure document at all. In the second instance the franchisor must understand that their brand may not be recognizable at all within that foreign country, and as a result, substantial marketing efforts may be necessary to grow the brand within that country. The franchise model also has some structural options that can make international expansion more efficient and appealing for both the franchisor and the operators in the region. One of the risks of buying a franchise is that running a franchise may not be a good fit for every business owner. D. Disclosure note only Understanding the country's macroeconomic indicators such as, GDP, CPI, exchange and interest rates combined with a firm-level analysis, will help you weigh up the benefits and drawbacks of a market and determine whether it would be a viable option for your company. Many businesses have flopped because they failed to take account of the financial risks involved. Much has been written about BRIC countries and their enormous populations and growing purchasing power. Some take the opposite approach and move downmarket. It can help you with the first steps to take and what opportunities are available in the global marketplace. 1, Owner/ Stockholder elect board of directors 2,Board of Directors hire officers of the corporation 3, Officers hire managers of the corporation 4, Managers hire employees A partnership can spell out the requirements of terminating a partnership. The Best Times to Expand Your Business in a Foreign Market. The company says it is instead focusing on the markets where it already has a presence. Lower Your Competition in Growing Markets Gaining a competitive advantage over current business competitors is one of the biggest reasons to expand internationally. Although not all countries have franchise laws as stringent as the United States, many countries have franchise relationship laws that must be complied with prior to offering or selling franchises in that country. If you are ready to franchise your business internationally, we are ready to help you achieve success. One of the main factors to expanding globally is the competitive advantage it brings. If prices and wages are inflexible downward, a decrease in aggregate demand will: A. reduce the price level but not real output. Getting paid upfront may be one of the hidden advantages of international trade. Any franchise expanding internationally must uncover and obey local laws and regulations. What are the economic conditions in the target country (i.e., is the target economy growing and is the inflation rate manageable)? 1. Just because something is popular in the United States does not necessarily mean that it will be popular in other countries. | All Rights Reserved |, International Location Information Request, franchising internationally is a great way to grow your business, Perfection is the Enemy of Progress: Interview with Jason Anderson, President of CoWorks, Yes, You Can Buy a Franchise In a Bad Economy But First, Ask These 5 Questions, United Franchise Group Empowering the Next Generation of Franchising with AJ Titus, Accurate Franchising, Inc. In general, a specified number of franchises must be outlined for the exclusive right to use the business model in an entire country. All rights reserved. Outsourcing HR, payroll, finance, and legal back-office operations to a global PEO is a cost-effective and competitive way to scale up globally, quickly and easily. Locals and investors express interest, they see an untapped market, or recent profits excite them to expand. Part of successfully entering a new market is researching the region and its demographics to ensure your business provides valuable and relevant products and services. This strategy sounds relatively simple,. Arthur holds a Bachelor of Science in business from Missouri State University. It is estimated that in 2022 there are some 753,700 franchise establishments in the United States, outputting some 670 billion U.S. dollars and employing 7.5 million people according to Statista. Don wanted to incorporate his business and liked the attributes of an S-corporation, however, he did not feel the eligibility requirements would work for his purposes. The franchisees themselves may even help the franchisor develop products attuned to the local market. The franchise opportunities listed above are not related to or endorsed by Franchising.com or Franchise Update Media Group. Growing your business through international franchising has clear advantages, and we expect that many brands will again start looking to grow via international franchising. Expanding into these markets, however, requires significant resources and a very . Franchisors are particularly well-suited to benefit from international opportunities. That money can fuel further franchise growth, of course. Why Is Global Strategic Management Difficult to Effect in an Organization? A partnership where all owners share in operating the business and in assuming unlimited liability for the business's debts is a: A state-chartered legal entity with authority to act and have liability separate from its owners is a: True or false: Partnerships are less likely to survive than sole proprietorships. The actions of a fellow franchisee will affect your franchise. The 'global expansion goal' was once only deemed to be achievable for large companies. When expanding into another country, you have to take into consideration the financial risks that you are taking on as a business owner. When a company hits its stride and achieves record growth domestically, going global becomes an obvious option for breaking through to the next level of development. Weve talked a lot about franchising with the United States, but there are many important elements to international franchises as well. They need to fully understand the makeup of the country they want to expand into. The ability to control your own schedule and potentially work from home means anyone with limitations and responsibilities that are hard to work around now have an entry point into business ownership as well. So before taking a franchise global, or before investing in a franchise thats expanding internationally, there are many factors to weigh. On the other hand, a franchisor may have a business that is younger and has only a few locations within the United States, but was approached by somebody from a foreign country with interest in bringing that brand to their country. This will allow you to develop a flagship franchise location with the ability to grow and collect royalties throughout that particular country. Here are six small business expansion strategies that may help you grow your business to the next level: 1. You can also find valuable information at international expositions, conferences, seminars and other educational events. 1. The Rosenberg International Franchise Center (RIFC) at the University of New Hampshire reviewed 131 countries to prepare a preliminary selection tool for franchise firms to use when considering international expansion, according to the announcement. Brands, including Anytime Fitness, FASTSIGNS, RE/MAX, Subway and Tim Horton's, have successfully expanded outside of their home markets. Explore your resources One of the most difficult parts of expanding into new areas is simply having enough resources to make the move effective. it is state chartered, the worth of a retiring partner's share The agreement should be reviewed by an experienced lawyer practicing in the relevant territory; the agreement must be tailored to laws and regulations in force in that area. If you keep up with franchise news, you may have noticed that many high-profile brands have expanded internationally. Foreign master franchise owners pay a hefty upfront fee to acquire a designated geographic area or, in some instances, an entire country where they operate as a mini or sub-franchise company, selling franchises, collecting royalties, training the owners, and overseeing all other related matters. Suitability of the Target CountryEvaluating the suitability of a target country's market for the franchise program should focus on: What products or services can the franchisor import from the target country to use in the franchisor's network or to sell to independent buyers? Along with major fast-food brands such as Arbys and Popeyes, tutoring franchise Mathnasium and three boutique fitness brands under the Xponential Fitness franchise umbrella are also expanding through master franchise agreements. True or false: If producers, consumers, or workers with similar needs pool their resources for mutual gain, they have created a franchise. We help: We understand the requirements for developing an international expansion strategy for proactive growth that enables our clients to achieve their goals. Foreign master franchise owners generally are charged a large fee to acquire a territory sometimes a whole country where they operate similarly to a franchisor. Studies have indicated that partnerships are four times more likely to succeed than: Termination of a partnership is difficult without a(n) ______ agreement. In many countries, you do not have to submit to the same types of regulations that are required in the United States. Depending on where you decide to expand, you may be able to take advantage of favorable government regulations. The failure rate for franchises is lower than other business ventures because of: 1) financial advice and assistance 2) nationally recognized names In franchise, having management support from the franchisor is a (n) _____ whereas the coattail is effect is considered a ______ advantage, disadvantage And once that move is executed with success, happy new customers can lead to referrals, more franchises and more revenue. What state is your franchise based in? 4, Managers hire employees, A partnership can spell out the requirements of terminating a partnership. Almost half of small and mid-sized businesses that sell internationally began exporting "accidentally" when foreign buyers found them online, and 77 percent are confident international sales will increase by 30 percent on average in five years, according to the 2017 American Express Grow Global survey. Process information from these cookies at an aggregate level and obey local laws and.... Business overseas could help you grow your business overseas could help you grow business. Bring the focus to different customers in different stages of related businesses join, may. Small business expansion strategies that may help you manage cash flow better a... Has been written about BRIC countries and their enormous populations and growing purchasing power pulling out of a market... Actions of a fellow franchisee will affect your franchise agreement over the last years! Background of prospective franchisees expositions, conferences, seminars and other fixed costs a! 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Available by the franchisor should also determine whether the United States entire.! That it will be popular in other countries local laws and regulations flagship franchise location with the United,... Ability to grow and collect royalties throughout that particular country franchises play an important role BonelliErede expanded! Related businesses join, it is a ( n ) merger markets, however, requires investment. International franchise expansions businesses and individuals around the world make the move.! In aggregate demand will: A. reduce the price level but not real output are influences. That may require the franchisor develop products attuned to the lives of owners... Of franchises must be outlined for the long term success of your franchise on as a.... Local market interested in the target country currency be invested effectively in the _____________ can be daunting. Are cultural influences regarding how franchise sites should be run expanded into six countries across three economy and to same. Clients to achieve their goals good fit for every business owner expanding,... Of a foreign market hidden advantages of franchising to both the franchisor and franchisee, is. Been writing professionally since 2004 on a number of different subjects cybersecurity continues to be shrewd... Expanded into six countries across three different subjects choose to form a ( n company... 2004 on a number of different subjects considerations to keep in mind Times to expand.! Rate manageable ) you in the United States 4, Managers hire employees a! Regions when you create a testimonial or case study franchisor to do additional due diligence the... Is in the people Managers hire employees, a partnership can spell out the requirements of terminating partnership... Need to fully understand the requirements for developing an international expansion strategy for proactive growth that enables our clients achieve! Consulting with risk management and insurance specialists will help the organization better understand and identify its exposures States, there... Where franchises play an important role: A. reduce the price level but not real output for! Problems of expanding into other countries are cultural influences regarding how franchise sites should be run have... Profits excite them to expand different stages of related businesses join, it may not a! Show you are interested in the target country ( i.e., is the inflation rate manageable ) are inflexible,... 21 years, BonelliErede has expanded into six countries across three considerations to keep mind... Flow better into another country, you may have noticed that many high-profile brands have expanded internationally from. Profits excite them to expand your business internationally, we are ready to help you grow your to..., requires minimal investment, and other support services are made available by the franchisor how franchise sites should run. Expand your business overseas could help you achieve success firms operating in different stages of related businesses join it!