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Wednesday 7th December, 2022

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How to identify your next international franchising market

Insight

How to identify your next international franchising market

The world is full of franchising opportunities, but carefully selecting the right country for your business is crucial for long-term success

The world is full of franchising opportunities, but carefully selecting the right country for your business is crucial for long-term success.

The world has gotten smaller and we truly find ourselves in a global market. Or so they say.

If that is the case, then why do most aspirational franchisors that I speak to set their international expansion sights firmly and solely on the U.S.? Or, to a lesser extent, Canada and Australia?

There are some very compelling draws, of course. The lack of a language barrier, common culture (for the most part), reassuring business frameworks, and sheer volume of consumers make them obvious choices. Add to that the well-established franchise frameworks and acceptance as a business model and the choice is obvious – right?

“If a franchise is still in that rapid expansion stage in its home market, there is a risk that taking on the States is a step too far, and too soon”

America or bust?

When discussing expansion options with newer franchisors, despite all those good reasons I find myself steering them away in particular from the U.S. The potential there dwarfs what we can imagine in the U.K., but much as British bands over the years have sought to “break America”, so too have British franchisors…with similarly mixed success.

If a franchise is still in that rapid expansion stage in its home market, there is a risk that taking on the States is a step too far, and too soon.

Anyone from outside the U.S. that has worked in franchising in America will know just how complex, competitive and expensive it can be. Legal costs to register agreements, trademarks, and disclosure documentation can be eye-watering, and the competition for each franchise prospect is fierce. For a foreign brand to come in and compete is no small task.

For me, the U.S. is the number one place to franchise your business, but in most circumstances a pretty poor choice to try first. I would instead recommend:

1. Establishing your brand properly in your home market

2. Cutting your teeth in other “easier” countries

3. Building up a war chest and a thick skin

4. Doing America properly!

Markets like Australia and Canada are superb franchise markets in their own right, and share similar characteristics with the U.S. in terms of the acceptance of franchise culture, challenging legal frameworks (compared to the U.K.) and very strong local franchisors as competition. They are also ideal gateways to test brands and concepts prior to launching in America, but as such competition and costs are also high.

There are of course many other brilliant countries in which to franchise, with some exceptional and well-established markets in Europe and the Middle East that are well known. I wanted to talk briefly though on the characteristics of those that you may not have yet considered, but might want to.

The world is your oyster

I would be remiss to not mention the two Asian giants. Whilst China and India by sheer size are extremely appealing, they harbor some pretty serious challenges that shouldn’t be taken lightly, nor should they be your first stop.

Business culture is very different, as are the risks that you potentially expose yourself to if done poorly. As an approach, if you do believe that your brand will do well there, then make sure that you work with a major local brand with the right level of transparency, experience, and resources.

On a personal note, I have had wonderful and successful experiences franchising in India and would focus energies there ahead of China at this time. Either may or may not be right for you, but getting good advice, particularly from professionals in-country, is absolutely essential to avoid getting gobbled up by the scale and pace.

Many emerging markets may on the face of it appear far less lucrative, or make far less sense than those more familiar. Like anywhere they each come with their own challenges and risks – but many have shared characteristics that I look for when choosing the less obvious choice.

Fewer barriers to entry

Most major world economies that have strong franchise markets, also have developed strong and robust franchise laws. This is great, as it protects you and your franchisees – but it also means that market entry costs can be potentially very high and your timelines can be drawn out by more draconian disclosure laws.

In many emerging markets these laws are in their infancy or still being established, and hence you can be more agile to open and with fewer legal costs. The counter to this is that the law is much less robust to protect you in the event things go wrong. Go into this eyes wide open and with good advisors.

Whilst there is no doubt that you will need to both localize content and marketing collateral to local requirements, the time and cost to do so should bear fruit in the long term if you are smart. Many smaller markets, for instance, where Spanish or Arabic are the primary languages will allow you to develop your offering whilst easing the obstacles to franchising in larger neighboring markets.

Favorable demographics

Many emerging countries are growing economically at a far faster rate than those more established, and with a younger entrepreneurial population. As a result, the middle classes are rapidly increasing with an appetite for quality and for international brands which are often seen as aspirational, and carry a badge of quality. Just make sure the financials of the model makes sense if you have to make adaptations to local market expectations.

First in market

Unless your product is truly innovative, then there is a good chance that someone else is already doing it, and doing it well in other countries. The question to therefore always ask yourself is: why would someone pick us instead if we tried to compete?

Perhaps it is worth then considering picking somewhere that the competition has not already secured a march on you, and where you can be first-in-market. Yes, the pond might be smaller, but you get to be the big fish from the beginning.

“Unless your product is truly innovative, then there is a good chance that someone else is already doing it, and doing it well in other countries.”

Picking a market

Strategically, there is a lot to consider. Knowing which market is right for you depends on a number of factors, but also requires deeper research into what makes your own brand unique, the type of customer that you have and where they can be found. What works for one franchise, may not work for another.

As always with international growth it is important to think strategically and a few steps ahead. Can you pick a country to open in that will bring with it additional opportunities, or one to help you to be ready to expand in your primary markets when the time comes?

The author

Andrew Walters is the founder of Kindling Franchise Consultants, a boutique firm with 17 years of international franchise experience offering specialist advice to franchisors looking to expand globally.

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