Building a Successful International Franchise Program · To build a successful international...

Building a Successful International Franchise Program

William Edwards, CFE, CEO Edwards Global Services, Inc. [email protected]

International Franchise Association International Symposium on Franchising Global Expansion for Diversification and Growth

Los Angeles, November 5, 2008

Today’s Presentation

To build a successful international franchise program the franchisor needs to ensure it has a sound business plan, a solid blueprint for targeting expansion markets and a firm handle on the appropriate expansion vehicle to utilize as it enters international markets.

This session will address these topics and provide a foundation to create a successful international program.

- Organizational readiness – When is it time to “go international”? - Identifying and evaluating target markets - Choosing the right expansion vehicle

© Edwards Global Services, 2008

Reasons To Take Your Franchise Global?

Exotic Travel

Tons Of New Revenue

More Spare Time With Your Family

© Edwards Global Services, 2008 Not exactly……….

Real Reasons To Take Your Business Global

Add new revenue sources

Reduce dependence on one market

Leverage your existing technology, know-how and intellectual property

Gain a competitive edge by importing innovation

Keys To ‘Going Global’ Successfully

CEO sees International as a business growth strategy

A pro-active business plan*

Trademarks

Strong training and support

Clear concept differentiation

Market and competitor research

Your Intranet

Identify, evaluate and sign the correct licensee


* ‘Pro-active’ is not choosing target countries based on Internet leads

A 5 Step Going Global Program: Assess, Plan and Implement

(1) The Initial Assessment & Analysis Process Assess the international potential of your business Assess your US and international competition to determine your differentiation Assess the international readiness of systems, staff, training, support and marketing programs

(2) The Pro-active “Going International” Plan Define the best international models, markets and ideal Partner profile Develop a ‘Going International’ budget with training, support and marketing program requirements Create international agreements and make trademark applications Develop a proforma country financial/development model – everyone has to make a good return on investment

(3) Implement Initial International Process Market the concept in priority countries after market and competitor research Find, thoroughly evaluate candidates and sign license, JV, acquisition or distributorship agreements

(4) Start-up Initial Operations Initial USA and in-country training of staff and build out of the initial units Refine the international plan and model based on early experience

(5) Grow International Operations Add more countries and units or channels in existing countries Monitor on-going global operations and development to produce long term revenues streams


International Development Options

Master Franchise - MOST COMMON - Franchisor grants exclusive rights for a country to one company, often with the right to sub franchise

Area or Province Franchise - Franchisor grants exclusive rights for part of a country. Often used by food concepts. Might allow sub-franchising

Direct Franchise - Franchisor awards Franchises and directly supports their Franchisees in a country

Joint Venture License - Franchisor jointly invests, owns and develops the business in a country with a local company

Direct Investment - LEAST COMMON - Franchisor owns and operates all units in a country


International Franchising Trends

Area or Province Licenses – Mr. Handyman, KFC, Papa John’s and Popeye’s Chicken In China

Large companies as multi-Master Franchisees – AutoGrill in Europe, Olayan in the Middle East and Duskin in Japan

Direct Franchisor support of local country units - Sign-A-Rama in Australia and the UK, New Horizons in Asia

No sub-franchising in a country - Build-A-Bear Workshop and many food franchises such as Baja Fresh, Carl’s, Jr. and Cold Stone Creamery

Joint Venture Licensing - Krispy Kreme in Australia and the UK

Direct Investment - McDonald’s and KFC in China, Eastern Europe and Russia


Key Considerations In International Franchisor Expansion

Control

Inve

stm

ent

less

less

Joint Venture (direct franchising)

Master Franchising/ Area License

Direct Franchise

Direct Investment

Developed by Kurt Ullman

Factors Franchisors Should Consider When Deciding Which Countries To Enter

  Rule of Law

  Country Stability

  Corruption

  Government Involvement

  Intellectual Property Protection

  Potential to Achieve Acceptable ROI


GlobalVue™: Doing Business In Various Countries


A ranking of ‘1’ is best, a ‘2.5’ is good and ‘4’ is worst

Example Of An EGS Client-specific GlobalVue™


A ranking of ‘1’ is best, a ‘2.5’ is good and ‘4’ is worst

LITS Countries: Low ROI, High Risk


Steps To Acquiring A License 1)   Provide us with your CV and company information

2)   Sign the Confidentiality Agreement and complete the Candidate Information Document

3)   Receive detailed business concept information and the master franchise terms and provide us with questions

4)   Attend Discovery Day meetings at the Licensor headquarters to meet senior executives, receive the financial model and discuss developing the concept in your country

5)   Sign a Letter Of Intent and make a deposit

6)   Sign the Agreement and pay the initial License Fee

7)   Start training at the Licensor headquarters


4 Keys To Global Success: Based On Hard Learned Lessons

•  International development is a strategic business direction for a franchisor, not just a short term source of up front fees

•  Your international business model must have clear differentiation in the market place

•  Pick countries where you have a good chance of making a good rate of return and protecting your brand

•  Take time to find, fully evaluate and sign the right master franchisees


Building a Successful International Franchise Program · To build a successful international...

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