If you are looking for a way to reduce your company’s dependency on domestic demand and strike out across the globe to expand your horizons and profit margins, international franchising is the strategy for you.
Using the franchising model for the global expansion of your business is a low-risk venture requiring minimal investment, with the potential for a huge upside in the form of scalability.
Most businesses reach a natural plateau, which sees their development stall and forces them to contemplate how future growth can be achieved. When you are constantly competing with the same brands domestically, while seeing an increasingly diminished return on your profitability and investments, it is a sign you have exhausted your customer base at home.
The internet may have allowed you to achieve global reach and even global sales, but you have found the profit margin on these digital ventures to be less. Franchising is a popular method of achieving physical business growth across multiple locations around the world. Here is why international franchising is the key to global growth...
What Is International Franchising?
A franchise sees you pooling your resources, business model, and capabilities with other like-minded business owners in order to reach the goals you have set for your business in terms of marketing strategies, distribution, and (of course) sales.
An international franchise generally involves a franchisor who gives a company or individual (the franchisee), the rights and ability to pick up their business model and brand (the franchise) and run it as their own.
The franchisee then sells the established products or services of the franchise using its tried and tested business model, whether they’re care franchises or cleaning franchises.
The franchisee pays an initial fee to the franchiser, made upfront when the franchising agreement is signed. Additional fees like marketing and advertising costs, and royalties, may also be applied, however, these are based largely on what is negotiated in the initial contract.
The franchisor makes training, advertising, as well as additional support services available to their franchisees.
The Benefits Of International Franchising
There are a lot of great benefits to international franchising. Not only are you able to break into new overseas markets and reach new customers, but you can also offer certain franchisees positions as foreign master franchise owners. These will usually be individuals native to a particular country, who understand all the politics and potential bureaucratic issues that can arise there far better than you could as an outsider.
There is usually a hefty fee that foreign master franchise owners need to pay upfront in order to acquire the rights to a specific geographic area. In some cases, they may be given the rights to an entire country. This enables them to operate their own mini-franchise within their specified region.
They can take on franchisees of their own, and are responsible for overseeing the overseas market, including providing training, selling franchises, and collecting royalties. They even have the ability to open their own units.
Strategic Alliances
You may find, on investigation, that you can create a strategic alliance with a local franchisor. You can reap the rewards of their knowledge and experience of the local market and economy, as well as gain insights into legal and socio-political issues.
Working together with compatible or complementary brands in a particular location can allow you to share equipment and space, and cross-train your employees. This results in lower overheads and running costs while doubling down on brand power.
Since local brands frequently receive government support and even access to local funding opportunities, you can gain the benefits you would never receive otherwise while providing them with access to an overseas branding partner in return.
How To Get Started With An International Franchise
There are a wide range of online resources and information available that you need to take your first steps and discover the best opportunities available for your company in the global marketplace. There are certain challenges inherent with master franchises and global expansion that you will need to take into consideration before you begin, such as contract negotiations, legal concerns, managing intellectual property rights, and even cultural differences that can create unexpected hurdles.
Your first step for international franchising should always be research. Read through all available resources and learn more about the practicalities involved in creating your own international franchise. Research the areas you’re looking to expand into first - is there truly a market for what you do there? Are there any social or cultural differences that might be problematic to your franchise?
A lot of low cost franchises, and especially internet franchises, have great appeal and novelty value overseas, but it’s important to consider the nuances of local laws before investing in a region.
