International Franchise Development
It is not unusual for a brand to receive unsolicited approaches from oversees parties interested in taking your concept to their shores. This can be flattering, and after all, an international approach is in many ways an endorsement of a brands concept and achievements.
However, before entering a Master Franchise Agreement, License, Development Agreement or Joint Venture half way across the world, it is crucial that every franchise concept ensures:
1 The domestic system is sound, prepared and the business has the required procedures and resources to train, support and manage international partners in an overseas environment, and
2 They select the highest calibre partner in a subject country to develop the brand, i.e. experienced, appropriately qualified and financially resourced.
Some franchise systems secure international partner agreements without having first reviewed the subject territory to determine who could ultimately be the most suited partner to develop their system. Simply actioning a first approach without diligent consideration of alternative partner options has often resulted in unsatisfactory long term partner selection. This can be a lost opportunity for the Franchisor with partners failing to deliver the brands expectations and development objectives in the subject territory.
The consequence of this typically has long term repercussions for the Franchisor, who can be left repairing brand reputation and managing;
• Loss of concept and product integrity in the subject territory, potentially damaging your chance to either continue, sell or re-enter this market in future.
• High legal and compliance costs correcting issues, and or dealing with early exit or termination.
• Franchisor not achieving satisfactory financial returns from the international exercise in the form of unpaid royalties and fees, increased management costs, and lost future earnings. As mentioned earlier, two of the most important factors to consider before entering into an international agreement (excluding commercial, legal and financial considerations, which I have not touched on in this article in order to elaborate on two main principals) can be better understood by firstly considering the following:-
1 Your Brand & System
a. Are the foundations of the existing domestic business solid and profitable?
b. Are the systems, procedures, guidelines and training documents in place and tailored to be effective for an international program?
c. Does the business have the human resource to properly train, support and manage ongoing compliance of international partner activities alongside its domestic operational requirements?
d. Are you satisfied with your international business and development plan, including local product or service supply chain considerations, product quality, localization and financial assumption and forecasts?
2 Your International Partners
a. Does your potential partner have direct experience and business exposure in your particular business category?
b. Does your potential partner possess a suitably qualified and experienced team to implement and manage the key areas of your system?
c. Does your partner have the required funding and financial resources to achieve the desired goals?
d. Are your partner’s development and growth plans realistic and achievable?
e. Does your partner have an existing real estate footprint, influence and connections (this is often more critical to a brands oversees growth than it may be in the brands home country)?
f. Is your partner aligned to your brand vision, share your passion, understanding and enthusiasm for your system, products or services?
g. Can your partner demonstrate a track record of staff training and customer service?
If you are not comfortable after reviewing these initial considerations, then it’s prudent to reassess your potential partner and/or your systems before proceeding.
Finding the right partner is absolutely critical to the success of your brand oversees, and by all accounts, is the number one factor determining your systems international success.
Taking time to thoroughly research and canvass a wide group of potential candidates within a subject international market is critical to making an informed decision and ultimately selecting the most experienced and suited partner. Franchisors need to closely screen each candidate and be satisfied they only choose partners who possess the relevant background, infrastructure and capital needed to successfully launch, develop and operate the system for the long term.
In addition, be sure to implement proper guidelines, systems and training procedures specifically tailored for an international development program. Your partner training program will need to cover all areas of the development process and concept, along with the provision of detailed manuals and procedures for each area of the business to guide your partner’s activities, including:-
• Initial start-up and implementation considerations;
• Organizational structures and hiring of key personnel;
• Product or services procurement and or local production and manufacturing;
• Real estate acquisition, store design/equipment and development;
• IT operating systems and reporting;
• Marketing, promotions and product development;
• Store operational systems and ongoing compliance/management;
• Training and staff development;
• Sub-franchising recruitment, training and compliance procedures.
In addition, the Franchisor should ensure they have suitably experienced domestic personnel in place to closely assist international partners during the establishment and implementation stage, plus to provide ongoing support, training and management throughout the entire agreement.
Andrew Lyme is Managing Director of Global Retail Partners, a franchise system development, management and advisory firm based in Sydney.
Andrew specializes in international franchise development, and assists both Australian and oversees franchise systems successfully expand to international territories by sourcing and securing international partners, providing management of international franchisees, licenses and joint venture partnerships, and establishment of systems and procedures to facilitate international growth.
The GRP team also provide services in corporate advisory/capital raising, franchise system establishment, franchisee recruitment and product development.
For more information contact Andrew at: