When Should a Franchisor Export Their Franchise?
At some point in time, franchisors will start receiving inquiries from international prospects. For new and smaller franchisors an interest in their franchise from other countries can be flattering. The thoughts of having franchisees in other countries can conjure visions of new found profits with a touch of prestige. Mature franchisors who have sold out a good portion of available territories in their home country see foreign markets as a great opportunity. However, whether a franchisor has 50 or 500 units the decision to take the franchise international is an important decision. If a franchisor is not properly prepared to franchise into other countries, a mistake can poison the franchise brand in that particular country. International prospects require validation just like domestic franchise prospects. It is easier to correct a bad franchise decision in the U.S than it is in another country.
Before a franchisor decides to export their franchise concept to other countries they need to perform some self analysis and make sure they're fully prepared for this new venture.
Following are some important steps to follow before going into foreign markets:
1. Have a solid franchise program in operation with successful franchisees and good franchise relations.
2. There should be a minimum of 50 franchisees in the home country. Although not a strict requirement, a minimum of 50 units indicates a level of franchisor experience.
3. Be sure that the franchise concept can be successful in other countries. Due to local customs or consumer preferences some concepts may not be adaptable to other countries. The U.S. Commerce Department provides a vast amount of information at no cost about country profiles.
4. There needs to be competent franchisor staff available to implement, train and support the new foreign licensee.
5. Make sure that all of the operating and marketing manuals are current and up to date. There should be marketing materials that can be adapted and translated for use in other countries.
6. Perform a competitive 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.
7. Narrow your choice of countries down to a set number that you can investigate and target for prospecting leads. At the outset focus on a geographic region such as Eastern and Western Europe or Japan. As an example, China offers an enticing market but has a number of hurdles to entry that are not easy to overcome.
8. Get some advice from a consultant or advisor who has experience in international franchising and licensing. You need to rely upon experts who have prospected candidates, negotiated agreements and have operational experience. Be prepared to invest some capital in overseas visits and legal costs.
9. Before implementing your international launch, apply to register your trademarks and any IP you own.
10. Establish a program for finding qualified prospects in the countries you've targeted. This may include a strategy of using a broker and lead generation programs.
11. Lastly, don't expect to receive a licensing fee until you've invested a good deal of time and effort in the entire sales process.
At some time during the life of a franchise company, there will be an opportunity to sell franchises in other countries. In the Internet age, international prospects will find a franchise opportunity more easily and often. A franchisor will face the temptation of embarking for foreign lands. Before deciding to export their franchise a franchisor should be sure that their concept will work and they have the resources to support the new licensee.
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