Going International? Don’t Forget One Important Thing
Franchisors that are considering exporting their franchise concept to other countries are advised to prepare by following a checklist of key items. However, there is one area that is often overlooked or shortchanged in the process.
Having been involved in international franchising as both a franchisor and consultant I’ve found that the process can begin a number of ways. I recall doing a franchise license in Japan that was initiated by a highly qualified group of Japanese business people that sought a certain type of U.S. franchisor. They ultimately chose my company and the mutual relationship was highly successful and endured through the full term of the master franchise agreement. In another situation my strategy was to actively locate a master licensee in a specific country by utilizing a broker. Franchisors may enter other countries in a variety of ways due to the shrinking world we live in.
The following represents a general checklist for franchisors looking to go international:
- Have a successful franchise program in operation with a minimum of 50 franchisees. The number of franchisees reflects a level of franchisor experience.
- Be sure the franchise concept can be successful in other countries. Due to local customs or consumer preferences some concepts may not be adaptable. The U.S. Commerce Department provides a good deal of information about country profiles at no cost.
- Have competent staff available to implement, train and support the new foreign licensee.
- All of the operating and marketing manuals should be current and up to date. Marketing materials should be adaptable and capable of being translated for use in other countries.
- Perform an analysis of target countries to determine if the franchise will face competition. A number of competitors can signal good demand for the franchise product or services.
- Narrow your choice of countries down to a number you can investigate and target for prospecting leads. Focus on a geographic region or specific countries for example, Eastern Europe, Brazil, Japan, etc.
- Get advice from a consultant or advisor who has experience in international franchising. You need to rely upon experts who have recruited candidates, negotiated agreements and have operational experience. Be prepared to invest some capital in overseas visits and legal costs.
- Before implementing your international launch, apply to register your trademarks, domain names and any IP.
- Have your franchise attorneys start on constructing a master franchise agreement.
- Establish a program for finding qualified prospects in the countries you’ve targeted. This may include a strategy of using a broker and other lead generation programs.
One item missing from this checklist, which is critical to an international franchising process, are the materials that need to be given to a qualified candidate. In many cases a franchisor will simply provide a prospect the same franchise sales materials they provide a U.S. franchise prospect and nothing more. I’ve had a client tell me that since they are a “green” company they have everything on-line rather than supplying printed material. This may play well in the U.S. however, in some countries a candidate expects to see hard copies of franchise literature.
Here is a list of items that ought to be in an international franchise sales packet. The franchisor pocket folder can be used to present these materials.
- Basic information packet for franchise candidates
- A fact sheet that includes highlights of the candidate’s particular country. This can be on one or two pages and doesn’t need to be in depth but rather should include demographics that can relate to the franchise’s product or services. Draw a comparison between market similarities in the U.S. and the foreign country. I would include the master license fees for the country or a particular region within the country.
- Absent an Item 19 disclosure, provide key financial data from U.S. operations that will enable the candidate to construct a pro forma. Expense data, product costs, staffing levels and wage costs can be provided. Verify compliance with franchise disclosure laws if any, in the particular country.
- Have an outline of the key steps in the international franchise process in writing. This would include discovery day visit, if applicable sample letter of intent , etc.
When deciding to go international a franchisor needs to follow key steps. In addition, it’s important to have an information packet that can be given to prospective licensees from other countries. Don’t depend upon using the same materials that are given to U.S. prospects and nothing more. Finally, don’t assume that what works in your home country will work everywhere else.