Bet the Franchise

New Outlook

Even with all the perks joining an American system brings, there may be times, like during wars or political conflicts, where other issues arise. How has America's war on terrorism affected the momentum of international franchising? Many franchises are not retrenching, but rather, making sure their global franchisees identify themselves to customers as local. "These companies are locally based. They carry the American brand, but they're a local corporation with local employees, local owners, and that's something that has to be reinforced these days," Portmann says.

This can be done through regional advertising and awareness campaigns. "We've seen examples, especially in the Middle East, where the owners of a particular American brand put a banner outside their store saying, 'This store is owned by Mr. So-and-So,' and put a picture in the restaurant of the owner with his family," Portmann says.

Baskin-Robbins, for one, encourages franchisees to present themselves as local entrepreneurs. "We like licensees to communicate to the publice as clearly and as often as they can that they are involved with their local community and they are, in fact, local citizens who just happen to own a license for an American brand," Kendzior says.

Holiday Inn, on the other hand, does not feel the need to distinguish its franchises as locally owned. Particularly in Europe, customers "see the sign that says, 'This hotel is owned and operated by...,' but they're not interested. They're coming there more for the Holiday Inn brand," van der Spek says.

Whether they know, or care, that a business is locally operated, international customers have different needs than their American counterparts. Franchisors are often willing to help franchisees meet those needs by allowing them flexibility with product offering and design. "Franchising has always been very open to the adaptation of menus and services to the local culture," Portmann says.

The Athlete's Foot, an athletic footwear retailer, deals with the needs of its customers in 50 countries. How does it manage to be so successful in such a wide range of locations? "We apply a cultural sensitivity and local knowledge to a particulart market, to tailor a solution that is most beneficial for that market," says CEO and president Robert Corliss. The company uses those principles to guide its decisions in everything from shipping costs to shoe sizing.

Even in an economic downturn, local entrepreneurs and U.S. franchisors are seeing the benefits of international franchising. But will the global expansion last? Insiders are confident that we'll see sustained growth.

"It's hard to say exactly what's going to happen, because [the effects of September 11] are all too fresh," says van der Spek, "but my gut feeling and my experience tell me we clearly will have more franchised hotels 18 months from now than we anticipated."

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This article was originally published in the February 2002 print edition of Entrepreneur with the headline: Bet the Franchise.

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