Mobile Edition
Print
Get the Mag
Weekly Updates[ILLUSTRATION OMITTED]
Most of the world is going through times not seen in several generations, but the impact on franchising, although difficult, has not been terminal. This is due primarily to the fact that franchising still produces the best model for growth.
Over the past several months, we have seen many examples of the commitment of franchisors to their franchisees and franchisees to each other in an effort to weather the storm during this extraordinary period.
As franchisors look for answers in growing their systems, their expansion efforts continue to be fueled through the international markets where they currently have presence and in the opening and development of new markets.
A key challenge facing all is how to grow in what is a costly venture without sacrificing the support services necessary to their current franchisee network.
How do we budget accordingly for effective international growth?
First, we must consider the needs of our existing international operations. Are they effectively making their numbers? Do we have issues beyond our control to deal with? Recently many franchise operations in Mexico suffered the third-party effect of having to deal with the swine flu epidemic forcing closures ranging from a few days to a couple of weeks. This in itself could be devastating especially with locations already struggling. As franchisors, we should have contingency plans (and funds) for similar scenarios which could pop up anywhere in the world.
Whether through temporary royalty adjustments, or actual injection of additional marketing funds to the area, these are the instances in which franchisors show their strength and commitment to their international partners.
Seek Alternatives
It is a proven fact that the better the franchisee performs in any given region, the more success the franchisor will find in entering a new market. As we look at budgeting for new expansion, we need to consider what has worked best in the past and go in search of new "out of the box" alternatives.
This is not to say that we should cut back so drastically that we begin to miss out on opportunities. After all, it has been proven that you cannot cut yourself into profit. There is much to be said about strategic planning and those who effectively implement their action plans with the utmost dedication, and those who, at the first signs of turbulence, deviate from theirs.
Throughout the years, I have witnessed companies squander budgets on unnecessary projects only to abandon them midstream. Then there are others who effectively allow the needed time for their development program to take proper course. What sets these two opposites apart?
The majority of franchisors with a significant presence in markets abroad did not measure at the onset the amount of funds that would be necessary to develop and expand their brands in these markets. Instead, they took the initial franchise and license fees to profit and figured that they could cannibalize their current staff and implement their current systems without the need for adjustments in each and every market regardless of customs, culture, language or idiosyncrasies. The results, in many cases, never met expectations, while in others returning catastrophic results with the brand positioning and presence in the respective countries.
Things have changed somewhat in the last few years. Franchisors today are much 'more cognizant of their support needs for entry into new markets around the world. They are budgeting operations, development, and marketing, tailored at the target country. They have also grown more sophisticated in their pre-entry analysis of each market determining whether or not it would be a wise endeavor.
The issue however, as we sail through these turbulent times, is the level of determination in riding the storm as you simultaneously implement your plan. While there are still potential investors today, they also have grown more sophisticated as to the needs for a new brand to grow in their respective region. The result is that it is now taking even more time to bring a qualified prospect to the table in what already was a time consuming and tedious process in the past.
Look Well-Ahead
I would recommend that any franchisor considering expanding abroad, as well as those already growing in these markets, to look at the very least to three years ahead while working on their international budget. This will eliminate the pressure on your current network leading to the temptation to pull the plug just when you are closing in on positive results. How wisely you spend the budgeted dollars is another story.
Even though international franchise exhibitions continue to be a good source for local leads, it is important to note that this is the category that requires the most out of your recruitment budget. As the popularity of franchising grows in every corner of the globe, so grow the number of events promoting its value. Because there are many exhibitions throughout the year and around the world, it is now more important to research the respective markets to determine where and when to participate. It is also important to familiarize yourself with the organizers. Do they have a track record of promoting successful events? Is it a first time opportunity in the market? Are there any added perks, such as pre-qualified appointments of potential investors during the event? What advertising avenues are they subscribed to in attracting prospects?
If there is any uncertainty, it is worth to visit the show prior to taking the leap and undergoing the investment. Most reputable organizers would welcome the opportunity to host you and show you around. While visiting, you should interview some of the exhibitors and attendees to get a good feel for the program. You can also use the time of the visit to see and feel the market. Even if you have been there before, things change, so it is best to be prepared and aware of all market indicators.
Alternatives
I cannot say enough about the efforts of the U.S. Commercial Service and their local offices and staff. The agency offers several different programs such as market research, global partner search, and their popular Gold and Platinum Key Matchmaking services. These programs should comprise the main vehicles in any franchisors international recruitment efforts. They are cost-effective and their service is customized to meet your needs. It is recommended that you research and work closely with the local offices to provide them as much detailed information on your concept, as well as all qualifiers in your requirements of a partner. The department employs a dedicated franchise team to assist in extending the bridge between the U.S. local regional offices and their international Commercial Service counterparts.
Industry-specific events offer another affordable alternative. These are usually less costly and focus directly on your product or services. The local chambers of commerce and other industry events are also good sources of referrals.
Lately, there are local organizations that offer recruitment programs and focused seminars for a very limited fee. These are better in the smaller markets where a good portion of the available investors in that country congregate at the events to explore new opportunities entering their region. The Commercial Service office in country can usually source these events without charge to the client/franchisor.
The Web
With so many Internet portals available internationally, the selection of best alternatives could be challenging and costly. It is best to network with other franchisors or suppliers affiliated with the International Franchise Association who could offer a fair evaluation of what has worked for them in the past. Keep in mind that these work best where the investment level is at the mid range of industry standards.
Print media is also a difficult choice. Once again because of the huge selection of available forums, it is best to research the opinion of those who have had the experience with the given publications. A good public relations firm could be instrumental in pointing you in the right direction as to where to go for full exposure.
The one certain fact is that there is no magic program. In any given market, different programs work in different manners with different results for different organizations. I always advise to test a sample of each available scenario and cautiously monitor the results without deviating from the main objective, in full utilization of all allocated budgets, enabling optimum results.
BY WILLIAM LE SANTE, CFE
William Le Sante, CFE, is managing director and CEO of Le Sante International. He can be reached at 305-387-5840 or william@lesante. net.
FEED