What are the most effective methods to adequately research a target market for franchising? Richard Chatten, International Support Manager of TaxAssist Accountants, advises
My study into international franchising for my Diploma in Franchise Management was eye-opening but it uncovered that the standards of international franchising are improving, as there are many businesses that are taking a more targeted, responsible and sustainable approach to their global expansion.
This is opposed to franchised businesses that have traditionally accepted and acted on international enquiries from countries that they were not originally looking to move into. This ‘reactive’ approach has a number of consequences, but that’s for another article!
The most obvious starting point for researching target markets is desk research. With the power of the internet at our fingertips, this has made it easier than ever for franchisors to carry out substantial research very easily. This is the most efficient method when researching international markets, as significant information can be obtained free of charge – but it can only take you so far.
Increased and more complex franchise legislation in the industry has encouraged franchisors to utilise government departments for their territory research. For example, the Department of International Trade and the US embassies and Export Assistance Centres can be beneficial, as these can provide sociopolitical and economic information on individual country markets.
Dealing with those countries that have franchise disclosure law will necessitate that franchisors have done their research as part of the disclosure process. Therefore, to complement your own desktop research, you can consider hiring a market research firm in your target country to provide more specific research reports on company websites, databases, trade associations, publications, websites and social media activity.
Engaging the services of franchise consultants who are there to guide franchisors on the basic principles of international franchising is commonplace in the industry and is also a very good starting point. Having worked for an international franchise consultancy for seven years, I can truly understand the benefits of this, especially when using a credible, qualified and experienced franchise consultant with good quality, reliable contacts and associations in target countries.
A very successful and awardwinning franchisor I interviewed as part of my study into international franchising highlighted that the company’s success was attributable to its use of a highly-respected franchise consultant; it was the consultant’s international contacts that armed them with the necessary knowledge for franchising in those countries. This particular franchisor went on to say that the franchise consultant they used had done a lot of the local market research for them.
Ultimately, to get a really good feel and understanding of your target country, you’re going to have to visit it. There is no better way to truly understand your target market than by spending time there and gaining an understanding of the business environment and culture, the industry you are in and how the competition is presenting itself.
Visits provide the opportunity to have face-to-face meetings with local franchise industry professionals, whether it be franchise consultants, franchise lawyers, local franchisors, brokers and executives from franchise recruitment websites and publications, and other industry suppliers. Do note, any visit should take two key things into account – the market for your product or service and the availability of potential franchisees.
As part of the due diligence process, you will expect your prospective partner (which could be a master franchisee, area developer or area representative) to carry out their own market research. Franchisors I interviewed explained that this really gave them the chance to help plug any missing knowledge gaps that could have been an obstacle to the opportunity.
Franchisors who are experienced in international franchising can also rely on their own previous experience to target international markets. One franchisor I spoke to took on an enquiry from a country they had not even considered, or were going to consider. However, based on their experience in successful international franchising and their judgement, they proceeded, knowing that they had a good chance of success.
The key point is that those franchisors who have correctly and successfully franchised internationally will do the required research. They will use some or a combination of the methods mentioned here, as well as others, and they will do it properly. Follow their lead!