The THIRST for International Data on Franchising

IFA, WFC and FRANdata are working toward developing a repository for international data

By Eric Simon

The United States has one of the most robust and mature franchising eco-systems in the world. What 25 years of analyzing the industry has showed us is that the current evolution – globalization – walks hand-in-hand with another factor: Information or access and transparency.

Globalization as a Necessity

As the global marketplace is increasingly shrinking, and with the challenges franchise brands have faced in the United States in the past years alone, diversifying internationally is no longer seen as a supplemental strategy to a franchise brand’s domestic development plans, but a necessity. The various economic and social complexities that occur from country to country, the United States included, allows a brand to become more dynamic as a company. Everyone knows that building a global brand takes time. It is a calculated process and can prove to be costly if not done correctly. Brands that have taken the leap overseas and don’t benchmark themselves with their in-country peers make themselves vulnerable to unforeseen weaknesses. Identifying how well you are performing specific to the country allows you to find ways to improve your operations and stay competitive in that specific foreign market. The problem with trying to benchmark international operations is that international franchise information is limited at best. We are at a pivotal point within the franchise community. Regardless of a brand’s international development goals, every brand requires accessible international franchise data to properly plan global expansion and reach business goals and expectations.

The Growth of U.S. Brands

Before any plan on capturing international franchise data can be put into action, we first need to understand the international strategy of our IFA members. The IFA conducted an extensive survey, with support from FRANdata, the U.S. Commercial Service and Edwards Global Services CEO William Edwards, CFE, to find out the state of globalization in U.S. franchising. The brands ranged from start-ups that have up to 10 units, to mature brands that have more than 5,000 units. According to the results:

• 80 percent of brands that are in the preliminary stages of developing their international program plan to start new franchise operations or accelerate their operations in international markets. Fifty-three percent of these brands stated their international plans will begin within the next six months.
• Thirty-seven percent of brands have established themselves abroad and have put a tremendous amount of focus and resources toward growing their units on the ground. These brands have more than 50 units internationally. They build their international systems through either franchise locations, joint ventures or have taken the leap themselves by operating corporate locations.

Eighty-two percent of the brands that responded believe that international growth is crucial to their company’s future success with just about half of the brands dedicating resources to operate international business. These resources include hiring outside advisors and consultants to help accelerate their plans. International expansion is so significant that 15.8 percent of the brands have their international revenue account for more than 26 percent of their total company franchise revenue. Brands are becoming more and more dependent on international revenue with some exceeding their domestic franchise system sales. IFA has many international support services available for brands interested in international expansion, these include educational programs, international mentoring programs, certified trade missions with the U.S. Commercial Services, and supplier referrals such as attorneys, consultants and brokers, to name a few. IFA builds these support services to help brands mitigate risk and optimize success internationally. The survey strongly suggests that systems of every size are creating and continuing to build their international operations. The growing interest in international expansion, and an equally growing number of foreign brands trying to enter the U.S. market, make access to franchise business intelligence an essential tool in planning expansion. Having performance, statistics and system data available will not only help franchise businesses improve their strategic planning and revenue stream, but just as importantly, the collective view based on the data would do much in promoting the importance of franchising to various government agencies here and abroad.

Building the Winning Team

IFA has identified information collection and analysis as one of its major missions in serving the global franchise community. In this regard, IFA has been working closely with the World Franchising Council, known as WFC, to identify what type of information is being collected and the reliability of this information. The WFC has been working on promoting the importance of collecting data and stressing the need for accuracy within country franchise associations. The trust and relationships the WFC has built over the years has yielded the first steps in creating this master database of international franchise information. That said, we are still far from being able to provide the business intelligence needed to show the world how much of an impact franchising has on the global economy. The U.S. franchise community’s long experience in franchising, from the micro level all the way up to the governmental level, would give other countries a unique perspective on the value that the business model brings to their specific economies.

Why it Matters

On a brand level, we understand that disclosing sensitive data comes with questions and concerns. But having a central repository of international franchise information would help franchise brands directly in the following ways:

1. Improved operational performance through better foundation for analysis and strategy development,
2. Franchise expansion and,
3. Better and relevant governmental basis of international franchise information will help produce policies that support instead of deter the growth of franchise advocacy.

Better Performance for Franchisors and Your Franchisees

Currently there is no way to accurately benchmark a brand’s international operation. Each country’s economy, international business laws and culture is very different and needs to be taken into account. The ability to compare your system with brands that are operating in the same country brings clarity to the operations and allows you to find specific areas of improvement.

Franchise Development

Depending on disclosure laws, having specific franchising information on a particular country can provide a potential master licensee or country developer the confidence needed to move forward on the agreement. It is important to note that international brands have a tremendous amount of U.S. franchise information going back decades. FRANdata has seen an influx of project requests for foreign brands wanting to use this information to develop a well-executed market entry strategy into the United States. Being able to capture international information will provide all brands the ability to develop best practices before and during their entry into a particular country.

Influencing Government Policy and Public Opinion

Arming the IFA and WFC with data allows the organizations to provide governments with factual statistics and evidence (such as dollars spent in the local economy, jobs created, the revenue generated through taxes and so on). into the impact franchising has on their countries. Governments provided this data will realize the value franchising brings to their local economies and will take a serious look at what it takes foreign brands to conduct business within that country. Excess taxes and tariffs prohibit growth and brands will think twice about doing business within the country if it is not fair.

Looking to Future Collaboration and Action

IFA, WFC, Edwards Global Services and FRANdata are working toward developing the repository for this international data. We need to identify what type of information is being collected and what information companies are comfortable with disclosing. If you are interested in working toward creating this first international data source, contact me or Josh Merin, CFE, the director of international affairs for IFA. Your support will not only provide your brand with information to improve your international operations, but it will also show the world the impact franchising has on them.

Eric Simon is franchise intelligence advisor for FRANdata. Find him at fransocial.franchise.org.