If you’re thinking of franchising, chances are you’re looking to global expansion. Expansion plans are almost always a part of the entrepreneurial franchisor personality.
The question is – how to get there?
The answer – start local before you take the global step – checking your model works locally then checking the differences that will come up within each community to expand into.
Much to the frustration of most entrepreneurs, global growth doesn’t happen all at once.
Looking at Maccas, which is about 80 years in the making, and now operating in around 100 countries with approximately 42,000 restaurants, it looks so easy. But remember McDonald’s started with one outlet when brothers Maurice and Richard McDonald converted their drive-through barbecue restaurant into a burger and milkshake joint and significant growth didn’t start until the sales entrepreneur, Ray Kroc, became involved and even then overseas expansion didn’t start until 20 years later.
Many franchisors have told me the same story. It’s tough and it takes time, tenacity and some flexibility but it does happen more often than you think.
Here are four well known Australian brands who made the move or tried to, and some of the difficulties they experienced.
City Cave
City Cave is an Australian Float and Wellness Centre, started up in Brisbane in 2016 by two tradies, Tim Butters and Jeremy Howell, and which expanded fast through Australia and then New Zealand giving 1.5 million Australians a float each year and reaching around 70 Australian outlets with about $60 million turnover last year.
But moving into the US was not so simple.
The first City Cave outlet opened in Florida earlier this year, but it took a lot of time and expense and difficult hard work to get there. Trying to organise store development from Australia meant they struggled with contractors and trades suppliers who were not accountable. It was not easy for the very experienced City Cave team but with tenacity and a flexible approach they made it.
Poolwerx
Poolwerx was founded in 1992 by John O’Brien in Sydney. Today, with over 500 territories made up of retail stores and mobile vans, they give their clients some of the best service and latest technology available to look care for their backyard or commercial pool.
In 2015 John decided to take the group to the US and opened in Arizona, purchasing a group of 15 stores to convert to the Poolwerx model. The Poolwerx US team was augmented by a very successful Australian franchisee who moved to the States to lead their US team.
In a recent interview though, John confessed they hadn’t done their homework because once they got to Arizona, they discovered the State was pretty much opposed to franchises of any kind.
As they became more familiar with the US market they relocated their head office to the more franchise-friendly city of Dallas in Texas and set up a 920sq m state of the art training facility and support centre, something which is at the heart of the Poolwerx model and behind its success. At the same time, recognising the resistance to their Australian staff, they recruited US residents to the US Executive Team to work with new franchisees.
The result – at the latest count Poolwerx in the US has 34 retail outlets and 209 trucks (note the local terminology – no ‘utes’ there!) across seven States, focusing on three recruitment channels – buying existing good quality outlets that have scope for rapid improvement in margins, converting existing pool business owners into the Poolwerx system and opening greenfield sites.
John tells stories of the difficulties he faced, expanding in Australia and in moving globally in several Franchise Simply Franchise Radio Show interviews with me available through most podcast apps including iTunes and Spotify.
Murray D’Almeida, founder of Donut King
Murray founded Donut King in Australia in 1981 and operated as a franchise since 1991. By the late 1990’s they had significantly expanded nationally so Murray decided to try moving to the UK.
Eventually, after having invested significant time and money, it was apparent they couldn’t meet their UK growth objectives, so they reluctantly shelved their ambitious plans for the market and returned to Australia.
Murray stated the lack of leasing opportunities is there prime issue. They discovered tenancies tend to be retained for very long periods of time with long-term sitting tenants. This was as opposed to the significant growth of shopping centres that had given them the opportunity to expand so rapidly in the Australian market.
It also took them some time to recognise that there was a strong bias against overseas businesses trying to establish in the UK. (A lesson learned by most Australian franchisors, and indeed other international brands, when spreading their wings beyond their home country).
Ultimately, after having invested significant time and money, it was apparent they couldn’t meet their goals and so they reluctantly decided to withdraw from the market.
Subway, Krispy Crème and Starbucks
Finally, stories from US examples attempting to enter the Australian and other markets.
The first Subway Restaurant was opened in Perth in June 1988 by the then Australian Master Franchisor who also opened outlets in Sydney, Melbourne and Brisbane in close succession. Regrettably, they did not recognise how hard and expensive it would be to provide the support services needed to help their new franchisees in cities thousands of kms away, so they failed. Eventually, Subway bought back the outlets, and the experienced US team took over and started to build the Australian group, city by city developing local clusters in each city closer together so they were easier to service.
The Subway Team’s understanding that they needed to be flexible enough to accommodate local conditions has won through on all accounts. In India, every Subway outlet has two counters, one with the regular international range of food and the other with a vegetarian range, suited to by the many Indians who do not touch most animal products.
Not so successful were Starbucks and Krispy Crème. Both failed to establish successful franchise groups in Australia initially. In these cases, it was essentially because they assumed Australians would automatically flock to the American brand, and because the US parent companies did not recognise the different Australian taste. Starbucks couldn’t accept that we just don’t like American coffee – the Italians developed our coffee taste way before Starbucks tried to offer us their Joe and the market is not big enough to accommodate Krispy Crème at the level needed. I believe they learned a lesson and have now developed quite different business models.
To Conclude
I know this need to recognise and make changes to take other cultures and markets into account is not restricted to moving globally. I found this out when we first tried to open successful WA franchise outlets in Melbourne and Sydney. The different interstate demographics and cultures —and the fact that we didn’t speak quite the same English language or have the same identity meant we were roundly rejected.
This is why Franchise Simply has recently merged with AN Global Holdings, a global business consulting and services brand with franchise and business expansion experience in over ten countries and growing.
We know to be successful in global franchising you need to establish yourself locally first then bring in the global experience to help you avoid the very costly global expansion mistakes made by some big and now very successful global franchise brands.
Global expansion is not just about replicating your local success on a larger scale—it’s about creating a flexible, a resilient organisation that can thrive in diverse environments while staying true to its core values and brand promise.
Looking into franchising your business? We can help! Reach out for a free consultation or talk to us at 1300 960 136.
Brian Keen has been involved in the franchise industry for more than 30 years and Prue has been involved with systems and business for as long. Together they founded Franchise Simply, Systems2Grow and Microloan Foundation Australia. Brian’s on-the-ground business experience as a multi-unit franchisee, franchisor and consultant helping many of the big names create their own franchise systems and growth over the years combined with Prue’s structured approach has been fed into Franchise Simply, helping today’s SMEs and Franchisors grow their business by franchising.