In 1988 I brought the AlphaGraphics quick print franchise to Hong Kong and Mainland China. In the succeeding almost 30 years, numerous foreign franchises of all types have entered the Australasia market. Our company has brought numerous F&B franchises to this region as well as home care, handyman and fitness franchises over the years.
The challenge of diversity
Just over 4.2 billion people live in the Asia-Pacific region in 2010, constituting 61% of the world’s population (unescap.org). There are 46 countries in this region, which includes much of East Asia, South Asia, Southeast Asia, and Oceania. “Half of the most religiously diverse countries are in the Asia-Pacific region.” (Pew Research Center). Over one third of the world’s approximate 3,000 languages are spoken in this region (Red Apple Education Ltd.). The economies range from first world (Hong Kong, Singapore and Japan) to just emerging (Cambodia, Laos and Myanmar). The GDP growth varies from less than 1% in Japan to over 7% in India (The Conference Board).
With this diversity in mind, international franchisors have operated across the Asia-Pacific region for several decades, especially the food and beverage brands. The presence of Muslim countries means no pork and Halal preparation. India means no beef on the menu. In Japan the menu has to be altered to take into account the need for low dairy and salt content.
What type of franchises do Asia-Pacific consumers and investors want? Children and adult education, health and fitness, business coaching, childcare, convenience stores, food and beverage, entertainment, fashion brands, business services, security and ecommerce. Food and beverage franchises are the most sought-after, followed by children’s education, as Asian families spend an unusually high percentage of their income on the education of their children in order to give them a edge when growing up.
There are numerous challenges in locating an international franchise brand here. Supply chain, diverse laws and regulations, distances, diversity of cultures, a wide range of consumer-buying capability, tariff barriers and outright government adversity to foreign business models. But consumers in both developing and developed countries in this region strongly desire Western products and services, and unlike some other parts of the world, growth is generally strong here.
Far Eastern success
PJ’s Coffee Of New Orleans recently opened it first franchised unit in Ho Chi Minh City, where there are already numerous coffee franchises. Coming from New Orleans, this brand has a French flavor, which is in demand by the Vietnamese consumer, according to Sean Ngo, the Ho Chi Minh City-based President of VF Franchise Consulting who brought this franchise to his country.
Ned Lyerle, President of US-based CKE Restaurants, which operates Carl’s Jr restaurants, sees tremendous growth potential in Asia and views the region as a key driver of shareholder value for our stakeholders in the years ahead. “We are bullish on Asia and see tremendous potential for the brand for decades to come!” says Mr. Lyerle. Twenty percent (20%) of CKE’s restaurants are located outside the United States, with Asia representing 10% of our international system and 35% of our development pipeline. Carl’s Jr currently operates in 12 countries in Asia and has development commitments to build another 440 restaurants throughout the region. Worldwide, CKE has over 3,500 restaurants in more than 30 countries.
According to Mr. Lyerle, franchisors need to dedicate resources in the region to manage the complexities of diverse markets, diverse tastes, mature and emerging markets, as well as the challenge of localized supply chain and procurement infrastructure. “CKE has made these investments,” he says. “We operate with a focus on the area development franchise business model. However, we operate a joint venture in China. We have invested significant time, money and resources to localize our supply chain in the Australasia region and now are ramping up growth on the back of our investment and successful opening. Also, food quality and food safety are paramount to a successful operation in any country. Our supply chain team and quality assurance division have invested countless hours in developing a safe and reliable network of local suppliers and distributors in the market.
“In both New Zealand and Australia, we enjoy the benefit of executing our brand with very little menu and marketing modifications. We are achieving scale in New Zealand where we advertise on TV, and we just cracked the Australian market with one of our most successful openings of all time. To be successful in Australasia, a franchisor must recognize the uniqueness of operating in each sub-region and also the unique channels that each country presents franchisor and franchisee alike. In the past year alone, we have enjoyed successful openings in three key markets; Australia, India and Japan. India presented a different challenge, given that we are primarily a premium, QSR plus burger brand.” Carl’s Jr spent two years developing a localized menu in India and testing it with consumers. “All food packaging and paper are localized specifically for India and our back of house had to be completely separated for vegetarian and non-vegetarian staff and production lines. While we stayed true to our best-in-class product positioning, our menu in India is very different than other markets in Asia. At present, we are only operating in the New Delhi metroplex. However, we plan to springboard to other markets in the near future.”
Japan, he says, is a very mature food service market with established suppliers and competitors. “It is important to understand that the Japanese consumer has very high expectations in terms of food quality, taste, dining experience and service,” Mr Lyerle explains. “Japan has some of Asia’s most discerning consumers and a franchisor must satisfy their appetite for something unique, innovative and real. For Carl’s Jr’s entry into Japan, we created a new ‘urban industrial’ restaurant design to elevate our in-restaurant experience to the same premium positioning that our brand delivers with its menu and service system. The new design and launch was well received in the market and we have high expectations for the future in Japan.
The Dairy Queen experience
Brad Houser, Senior V ice President of International Dairy Queen says, “American Dairy Queen Corporation (ADQ) operates a 6,800 unit franchise system in the United States and 28 other countries. Fans of our delicious food and mouth-watering treats have remained loyal to the brand for over 75 years. Our Asia market has been the driving force behind our international development, with over 700 locations operating in China, 400 locations operating in Thailand and close to 100 locations present in the Philippines. Our recent success story has been in Vietnam, where we introduced our DQ Grill & Chill concept whose vast menu includes delectable burger offerings, including a Flamethrower GrillBurger, and our signature chicken strip basket, along with a vast array of salads, wraps, and delicious sandwiches. All of our restaurants also include our industry-leading DQ soft serve ice cream products, such as our world-famous Blizzard Flavor Treat, fruit smoothies, MooLatte Frozen Coffee Flavored Beverages, and frozen cakes in a variety of flavors. To meet with local flavour desires, Green Tea, Mango Sticky Rice and Red Bean offerings complement global offerings such as Oreo and Strawberry Cheesecake.
“Our global focus for development moving forward will be on our DQ Grill & Chill concept as we believe our array of offerings are what our fans are looking for during any day part and provides the greatest opportunities to build consumer brand loyalty success to our franchisees. South Korea, Malaysia and Japan are on the horizon in the future as great opportunities for one of America’s most loved brands.”
About the author
William Edwards, CEO of EGS LLC, has 42 years of international business experience. He has lived in seven countries, worked on projects in more than 60, and has advised more than 50 U.S. companies on international development. Contact him at 1 949 375 1896, bedwards@edwardsglobal.com,, and read his blog at geowizard.biz
