Over the past few years, the slowdown in the American economy has inspired many franchisors to consider expanding their businesses overseas. Even putting the recession aside, international franchising can be a profitable alternative to trying to expand in an already saturated American market. As we noted in our September 22 blog, Yum! Brands recently sold 2 American systems (A&W and Long John Silver’s) to focus on brands more suited for growth in China.
However, expanding overseas isn’t the same as selling franchises in the United States. You, the franchisor, will need to take special considerations and make some adjustments to your business model before entering the international market.
Understand Local Regulations
You will likely need to follow different franchise, business opportunity, tax and reporting rules in international markets than you do in the United States. Some countries will require your company to operate profitable locations in the country before you are allowed to sell franchises. No matter where you operate, you will probably need to tailor your franchise agreement and offering documents to meet local rules.
Revamp Your Product
You will probably need to tailor your product to adapt to any particular country’s culture and preferences while keeping the soul of your business intact. For example, if you are in the restaurant business, you might need to add more vegetarian options to the menu or substitute unpopular or hard-to-source ingredients with local favorites.
You may also want to take a look at your brand image. Could your business name or logo be unintentionally humorous or offensive when translated in the local language?
You need to understand the culture of the country in which you will be operating. Figure these issues out early, so you don’t lose money by making an unwitting mistake.
Consider Local Residents’ Purchasing Power
Can the residents of the country where you are expanding afford to buy your product? Do you need to alter your product so that it is accessible to more people? These are a couple of considerations worth thinking about.
For example, although China and India are both densely populated and quickly growing countries, many residents still cannot afford to purchase Western-style products.
Get Qualified Help
International expansion can be tricky, but also a rewarding way to grow your business. If you think operating a franchise overseas sounds promising, assisting the help of an experienced and knowledgeable team is vital. Local franchise attorneys, accountants and franchisee recruiters who understand the regulations and culture in the target country are a few examples.