Franchising in Other Markets

By Martin Mendelsohn

This series of articles will consider the basic issues to be considered when expanding a franchise system into other markets. By other markets, we mean those markets in countries other than the country of origin of the franchise system.

There are some fundamentals to be taken into account before one can embark on the process.

First, one will need to have resources available to be able to contemplate such a step. These resources need to be a combination of financial and manpower.

Financial

The franchise company must have a successful domestic system which generates sufficient profits to enable the franchisor to produce the resources which will inevitably be required to fund its expansion.

Manpower

Franchise companies looking to expand into other markets often underestimate the resources which will be needed if the domestic business is not to be adversely affected. Such expansion really requires that at least one person should have a full time commitment to its establishment. Someone who is able to deal with it, in addition to continuing with his responsibilities in the domestic market, will inevitably find that conflicts will arise with the two facets of his job requiring attention simultaneously - a decision has to be made about which should have priority. The loser will have to suffer. Invariably the loser will be the international operation. There is a high risk time span for international during the investigation, selection, negotiation and early operational activities which can have an unwanted outcome. The way in which to guard against this risk is to appoint one person with the full time responsibility for the international expansion. Once the local franchisee in the target territory is identified and signed up, other people resources will be needed to train and deal with the establishment of the first outlet and to provide continuing backup.

More Financial

It will be obvious that there will be cost implications arising from the “manpower” resources which are required and which will have to be calculated in the franchisor’s budget.