Sunday, 28 March 2010 at 11:16, By Christopher James Conner
What business owner doesn’t want to be able to legitimately say that their business is an international firm?
We see it every day, a small company with the word, “International” on their logo and always accompanying the name of the firm.
The truth is that there is a big difference between saying your company is international and actually successfully replicating a business model in another country.
Doing business Internationally can be a daunting task. For most of us entrepreneurs, running and managing a successful business domestically is enough work, let alone handling the difference in culture, business practices, customs, traditions and other nuances that come with doing business in another area of the world.
One alternative for business owner to expand internationally is to grow thorough franchising. Franchising is by nature a model that allows for company growth over distances without the management difficulties that come with corporate owned offices.
Franchising effectively means loaning your trademarks, logos, branding and business system to a local owner operator who purchases to right to use them in commerce.
The benefit to the owner operator is the experience the franchisor brings to their business endeavor, proven system, training and mentorship from the franchisor. The Franchisor or the original entrepreneur benefits from the franchisee investing in the new operating office location and putting up their own capital, the franchisor also benefits from an operator who knows their local market, has the connections with local business people and is dedicated to the profitable management of the location.
What better scenario could an entrepreneur have when considering International growth? You get someone from the region you are expanding into who has contacts, an understanding the culture, business practices and overall way of life. The changes for success are increased enormously with these odds in your favor now.
There is a reason why you see McDonald’s, 7-11’s, Holiday Inns and other franchise chains all over the planet, the model works!
What are the keys to franchising internationally, how can this be accomplished? A company considering franchising Internationally or all for that matter needs to have a proven, repeatable business model in place.
There should be documented systems in place that can be taught and standardised. International franchising will magnify in efficiencies and holes in a business model’s operating system. If there are undefined, or unrefined aspects to the original model, the franchisees systems will be drastically affected.
The original business needs to have some brand value that may be recognisable and carry brand equity with the franchise offering. The business product or service offering should have competitive and unique differences compared to the competition.
The original Entrepreneur should be dynamic, empowering and extremely motivated to nurture the international franchisee.
An important aspect of whether a franchise transaction is successful is the careful selection of the people involved. Certain people will do well in some franchise businesses and others will not. Personalities of the franchisee and franchisor must also match on another and be capable.
The intangible aspects of matching two people as partners must be considered in a franchise transaction.
Franchising also has legal constraints and different regulations depending on the country where business is being done. It is important that before entering in to any International franchise relationship that both the entrepreneur and the franchise confirm that they are abiding by the local laws and regulations.
In the United States, the Federal Trade Commission is the governing body that oversees franchising. Each country has a similar oversight committee like the FTC who will confirm that a franchisor is legally qualified to offer a franchise.
The beauty of the franchise model when considering International expansion is the strengths of both the Franchisor and the franchisee are maximised and the weaknesses of both sides are suppressed.
International Franchising is no meant for every entrepreneur, but for the right businesses and people, it can be an extremely efficient way to build a company overseas.
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International Franchise Expansion
It takes a very well defined business model to effectively franchise internationally, I have seen many fail at the process and jump into international expansion much too quickly.