By Brian Shaughnessy, Vice President of Franchise for On The Border
So, you feel your franchise brand is ready to expand internationally — what’s next? From my experience, international franchise expansion is certainly no easy feat, but once a brand understands the required logistics and has the proper team in place, the process isn’t as daunting as it seems.
On The Border’s first international location opened in 2007 in Seoul, South Korea. Through thorough research, building a high-quality team and gaining an understanding of the market, we now have 16 franchise locations across South Korea with multiple other international regions currently in the works. In the paragraphs that follow, I’ll share what I’ve learned throughout this process and highlight the key elements that can help other brands successfully launch a business internationally.
First Steps
Prior to pursuing international expansion, a brand needs to identify why it wants to expand. Many dream of high profits and global recognition, but it’s important to discuss other objectives. Do you want to find new customers? Create a competitive advantage? Diversify your offering? Similarly, you need to set quantifiable goals to help determine your next steps in expansion.
A brand also needs to have a solid team in place before expanding internationally. Connect with an international consultant or broker to help understand the intricacies of each market you want to expand into. Then, ensure your legal counsel understands the country’s Franchise Disclosure Document (FDD) requirements, FDD filings, local laws and trademark requirements; you need to know what trademarks will be approved, denied or potentially altered prior to breaking ground. Finally – and arguably most importantly – you need to ensure that you’re working with a trusted franchise partner that has operational, entrepreneurial and leadership skills and the team to support growth. They should have the characteristics of your ideal franchisee and then some, as they’ll be introducing your brand to an entirely new group of people.
It’s also important to have a solid corporate training support infrastructure and a determined export process for products. Having an accessible location in your domestic country for your international partners to train and learn about the brand is also key.
Deciding Where to Grow
One you decide to expand your franchise internationally and have the team and proper processes in place, the next big decision is figuring out where to grow. While this might be obvious, the first decision-making factor should be whether or not a country is safe to visit and if it has any entry restrictions.
Next, determine if there is current interest in specific international regions both from consumers and potential franchisees. It won’t make sense to expand into a market if there’s not a demand for your product, or, if there isn’t an interested investor. It’s also important to research areas your competitors have expanded into and assess whether or not they were successful in that expansion.
You must also consider the cost of doing business in that country. Conducting business in certain areas can produce a lower return on investment, especially if no one in the country speaks English – for example, the translation cost for an FDD can be fairly expensive. You must also determine if a region is suitable for a larger development agreement — you don’t want multiple international partners with only one or two locations, but rather, multi-unit operators.
Challenges and Benefits of Franchising Internationally
Growing a brand internationally undeniably has its challenges. Learning how to navigate communication in different time zones can be difficult, especially when working in multiple regions across the world. Other logistical challenges include figuring out how to export products and dealing with system differences. International partners might not have access to the same POS, loyalty or catering platforms that are available where your brand is based. In addition, visits and audits might not occur frequently due to travel, so regular communication via phone and email needs to be possible. However, while the long distance may seem like a hindrance, modern communication allows you to connect despite being thousands of miles away.
Additionally, while gaining global awareness your brand also grows in domestic interest because its presence is multiplying. As you continue to grow, it helps to build a solid reputation for the brand as an organized concept that is strong enough to withstand the international challenges. Despite misconceptions that owning international units is not cost effective, growing internationally can most certainly yield greater cash flow. All in all, through global expansion your business gains invaluable international recognition and, with the right expertise and markets, can help to significantly maximize profits.