International Franchising After September 11
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Q: I am a franchisor with 82 units in the United States. I had planned to expand my business overseas and hire a franchise salesperson for international sales during the first quarter of 2002. Before I make this kind of investment, I am wondering what effect the terrorist attacks have had on American franchisors. Do you think this is a good time to go international?
A: Your question is very timely. Both McDonald's and KFC experienced some trouble at a few their restaurants in countries with a militant Muslim population right after the attack on the World Trade Center, but the trouble was short-lived. These disturbances did, however, generate some debate within the franchise community about whether the events of 9/11 would have a negative impact on the value of American brands and hamper U.S. franchisors doing business overseas.
While we can make no guarantees about what the future holds, we can report that those franchisors we've talked with are still positive about their international operations. Most have received strong messages of support from their existing international franchisees. One franchisor whose annual convention was in Palm Springs, California, at the beginning of October was especially pleased that his master franchisee from Saudi Arabia made the trip to attend the conference.
Several franchisors noted that in the days immediately following September 11, the number of international inquiries they received dropped substantially, and those who were working with prospective franchisees in largely Muslim countries had a difficult time keeping the discussions moving forward. But, they tell us, business has pretty much returned to normal.
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One issue that may cause franchisors to rethink and readjust their international programs is the ability for foreigners to obtain visas to visit the United States. All indications are that visa requirements will be tighter and more heavily controlled in the future. This will impact two areas:
2. Training visas also may be more difficult for those coming to the United States from some countries, and franchisors may be required to provide more training in regional locations outside the U.S. or via the Internet.
One theory as to why September 11 has not had a bigger impact on international franchising is that the threat of terrorism and high levels of security are commonplace in many countries, and people have learned to carry on with their lives-just as Americans are now doing. Also, the world can readily see that Americans will not be defeated by terrorists and that, if anything, our resolve to preserve our way of life has been strengthened.
The bigger criteria for a decision to expand internationally should be your assessment of the economies in those countries that you have targeted. While the long-term (15-year) predications are for global economic growth to return to the high levels of the 1960s and early '70s, the benefits of this growth will not be universal. It is now more important than ever to carefully examine all opportunities and develop a business plan for international expansion that proactively targets those countries offering the greatest potential and avoids the temptation to respond to every inquiry-whether or not it fits into the plan.
Michael H. Seid, founder and managing director of franchise advisory firm Michael H. Seid & Associates, has more than 20 years' experience as a senior operations and financial executive and a consultant for franchise, retail, restaurant and service companies. He is co-author of the bookFranchising for Dummiesand a former member of the International Franchise Association's Board of Directors and Executive Committee.
Kay Marie Ainsley, managing director of Michael H. Seid & Associates, consults with companies on the appropriateness of franchising; assists franchisors with systems, manuals and training programs; and is a frequent speaker and author of numerous articles on franchising.
The opinions expressed in this column are those of the author, not of Entrepreneur.com. All answers are intended to be general in nature, without regard to specific geographical areas or circumstances, and should only be relied upon after consulting an appropriate expert, such as an attorney or accountant.