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Franchising Trends

Franchises Go Global

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While U.S. franchisers have been carrying their brands to the far reaches of the world, they've passed at least two dozen concepts traveling the other way. Here's a closer look.

The hardest thing about franchise training for Kathy and Michael Serls of York, Pa., was getting there. Last May, the new franchisees of Cartridge World spent 21 hours on airplanes to reach the company's headquarters and training facility in Adelaide, Australia.

During their two weeks Down Under, the Serls learned how to refill ink-jet and laser cartridges for printers, fax machines and photocopiers--and spotted a koala bear at the top of a tree.

Thanks to an influx of foreign concepts, the U.S. franchise scene is getting increasingly exotic. No one, not even the International Franchise Association trade group in Washington, has an exact count. But while U.S. franchisers have been carrying their brands to the far reaches of the world, they've passed at least two dozen concepts traveling the other way.

Arrivals From Australia

It's no surprise that many, like Cartridge World (50 U.S. units), are from Australia, because that country "is the most franchised on the face of the earth," says William Edwards, president of Edwards Global Services Inc., an international franchise consultancy in Irvine, Calif., that specializes in Australian brands. "They have 800 indigenous franchise systems for a population of 20 million and we have 3,000 for a population of 280 million," he says. "They're coming here because they're running out of places to franchise down there."

And because of the size of the U.S. market. "Americans and Australians are a lot alike," says Ian Moses, who moved the headquarters of his company, Aussie Pet Mobile (205 U.S. territories sold), from New South Wales to Dana Point, Calif., in 1999. "Two thirds of households in each country own pets. But there are so many more pets here."

While pet ownership may be similar, franchise ownership is different. In Australia, says Mr. Moses, franchisees tend to be single operators who purchase one portable dog-washing trailer that they operate themselves. In the U.S., they're like Amy and Michael Brennan of Deerfield, Illinois, who have committed to spending over $250,000 for a fleet of six tub and dryer-equipped vehicles and hiring a crew of professional groomers to operate them. So far, the Brennans have two trailers and charge an average of $55 to wash a pet in its owner's driveway. "I think having Aussie in our name is an asset," says Mrs. Brennan. "One customer even called us because she has an Australian Shepherd."

Dogs from both countries may be alike when it comes to soap and water, but they differ in behavior, says Liam Crowe, president of Bark Busters U.S.A., in Denver. Bark Busters, a dog-training system that guarantees quick results without physical punishment or treats, was started by a couple in Wollongong, Australia, in 1989. "We re-educate owners to treat their pets like they were descended from wolves," says Mr. Crowe, who was a franchisee in New Zealand before moving in 2000 to help run the U.S. operation, which has grown to 52 franchises. "Back home, dogs are outside animals," he says. "Here, people treat them like babies and their dogs suffer more separation anxiety."

Bark Busters is also attracting higher-quality franchisees in the U.S., Mr. Crowe says, who invest a total of $45,000 to learn how to stop dogs misbehaving. Don Schellenberg of San Ramon, Calif., recently left his job in customer service for an elevator company to run the Bark Busters franchise he bought with his wife, Karen. "My first customers," he says, "were two boxers who jumped all over me when I walked into their house. But after I spent two hours with them and their owner, her husband came home and was astonished that they weren't mauling him." Franchisees charge $375 for single transformations and $575 if the changes are guaranteed, with remedial antibarking lessons, if necessary, for the life of the dog.

But Chip Reaves, national director for Computer Troubleshooters U.S.A., in Decatur, Ga., says the 141 U.S. franchisees, who repair computers at customers' sites, are "just about the same" as the system's other 200-plus franchisees in 15 countries. They're all technology oriented, he says, and "thanks to Microsoft, they all speak the same language." Franchisee Kelly Reed in Haysville, Kan., says the only time he realized he didn't belong to a U.S. franchise was when he hit a computer problem so vexing he had to call Australia to ask the company's founder for help.

Other franchises with headquarters in Australia and franchises in the U.S. include Cash Converters, a secondhand retailer from Perth with 16 units in eight states, and Sydney-based Expense Reduction Analysts, who are hired to audit expenses and find cost savings, whose U.S. office is in San Diego. Service franchises from Canada also do well. Shred-it, a franchise that shreds sensitive documents in trucks that operators drive from customer to customer, has sold out all its U.S. territories, says a spokeswoman in their Toronto office.

Crossing the Border

But inbound food concepts have trouble crossing the northern border. Linda Mikulik, operations manger for Koya Japan in Winnipeg, Manitoba, one of Canada's thriving chains of Japanese-style restaurants, says her company has only two U.S. franchises--in Colorado Springs--and recently closed a third. Finding locations in U.S. malls is hard, she says, "because landlords here are unfamiliar with us and would rather rent space to a familiar concept."

The trip across the southern border is easier, perhaps because of the Latino immigrants who have moved to the U.S. from Central and South America and still yearn for their native foods. Churromania, a franchise from Venezuela that sells flavored cinnamon sticks called churros, has six units in Florida. When the seven franchises of Pollo Campero, from Guatemala, opened in California, Texas and Virginia, people lined up for blocks to buy its fried chicken. But William LeSante, president of Global Development Specialists, an international franchise consultant in Miami, warns that foreign franchises moving to the U.S. must offer products that appeal to mainstream tastes as well. Right now, he's working with Helados Bon, an ice cream and coffee concept with 230 stores in the Dominican Republic, to develop a gourmet sandwich menu for the U.S. similar to Panera Bread and other fast-casual brands.

But the largest foreign franchise of all, Kumon Math and Reading Centers of Japan, hasn't changed its methods since 1954, when high-school math teacher Toru Kumon developed daily worksheets to help his young son learn math. Today, similar worksheets--printed on thick paper so kids can erase wrong answers--are used by franchisees in 22,000 Kumon centers around the world, including 1,180 in the U.S. Franchisees in the U.S. have no quarrel with the approach to supplemental education, for which parents pay an average of $80 a month per course, but say the franchise system should be adapted.

Protected Territories

Vijay Hira, a franchisee in Oak Park, Ill., says: "Japan is so education-oriented, you don't need protected territories because you can have a franchise on every corner. But here, children are more interested in sports and are less disciplined, so at some point they resist coming. We can't succeed if centers are in close proximity."

No matter what the foreign franchise is, getting started in the U.S. takes time and money. Even though Computer Troubleshooters is an easy concept--franchisees invest about $20,000 and pay a flat fee of $220 a month instead of a percentage royalty--it took that company a year to get all its legal documents filed, says Mr. Reaves. And Mr. Edwards of Edwards Global Services tells his inbound clients to expect to spend about $250,000 for all required documents, registrations and legal fees.

But establishing a successful franchise in the U.S. also has its rewards. In 1975, a young shoemaker, Francisco 'Pancho' Ochoa, opened a roadside stand in Guasave, Mexico, calling it El Pollo Loco (the crazy chicken) and sold flame-broiled chicken marinated in spices and fruit juice from an old family recipe. Soon, he had 85 El Pollo Loco restaurants in Mexico and in 1980, he moved across the border and opened more in Southern California. In 1983, Denny's Inc. bought franchise rights to just Mr. Ochoa's U.S. operations--for $12.3 million.

From StartupJournal.com
Copyright © 2005 Dow Jones & Company, Inc. All Rights Reserved

Julie Bennett is a freelance writer.

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