What Franchisors Need to Consider Before Expanding Internationally

Expanding your franchise concept globally is a challenging decision. It can give you great growth opportunities beyond your current home market. However, doing so prematurely can put undue stress on your schedule as you try to replicate your US operations with a culturally different demographic while managing expansion and domestic support.

Before expanding into new international markets, make sure your business concept is well developed, all intellectual property is registered and trademarked, marketing materials and manuals are translated, and you have a local team available in the target markets to help with implementation and troubleshooting.

Inexperienced franchisors should avoid rushing into international expansion without doing extensive research and laying the right groundwork. International units can be more challenging than domestic units due to travel distances, language barriers and cultural differences. It is important to ensure that your products or services are needed or wanted in your target international market.

So, if this is a challenge, why not just stick to domestic unit growth and skip the international headache? First, the ability to introduce your products or services to new, untapped markets can be a huge profit boost, especially if you’re running out of places to develop internally. Another thing is that many foreign consumer markets crave US concepts. Best of all, American franchises are often viewed as a sound investment because of the proven programs and training they offer.

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The success of franchising always depends on getting advice and professional help, but nowhere is it more important than expanding into international markets. You need to work with franchise and legal experts who specialize in international financing and have knowledge of the countries you are targeting. They will have a network of partners with in-depth knowledge of the laws, regulations and the political and business environment of the markets you are exploring. Before you invest in an international project, these experts can help you narrow down the countries or regions where your idea will work.

Some important considerations in growing an international franchise include:

• Political and economic stability of the region is the most important objective.
• Franchise state laws or regulations. Most countries have some form of business laws to protect their citizens, but only a few have specific franchise registration requirements that must be complied with.
• Check the relative ease or complexity of bringing products into the country. You’ll need to set up the appropriate props to get them there. Or, if you plan to source products locally, you’ll need local connections to help establish a reliable local supply chain.
• How will the royalty and ad fund costs be transferred back to the US in an efficient manner. Remember, you’ll also have to deal with exchange rates, money transfer fees and local banking regulations.
• Being able to find the right partners who are financially equipped to grow your idea beyond a single unit. Several different legal structures can be used, from directly granting a franchise to an individual or group to setting up a separate business through a Master Franchise Agreement for each country, where your main franchisee grants the rights to individual franchises and supports those local franchise units.

  Again, this is where your trusted advisors can advise you on the best structure for your mind and country. Knowing your partner is important. You need to be comfortable with them as people and know well about their other partners and businesses they may have. Both parties must follow transparency laws that require disclosure of all associated businesses, owners and decision makers. You need to know where the money is invested in your mind.where it comes from.

Side note: It is also clear that the same due diligence and professional support is required when an idea is brought from another country or region to the US as it is for US-based ideas to go abroad. International franchisees will also need to find trusted local franchise advisors and attorneys to help them transition from a national or regional concept to an international one as they enter the US market.

Where can you expand first?

Canada has long been the first choice of expansion for many US franchisors because of its proximity and because English is the first language across the country. But don’t be fooled into thinking that Canada’s culture and business environment are no different from the U.S. Likewise, Mexico is often the first platform for U.S. franchisors looking to expand into Latin America because of its geographic proximity, but language and cultural differences are also increasing. .

For example, let’s say you expand your idea to Latin America; Not only does the Spanish in that region vary from country to country, but it is important to know that Spanish is not the only language spoken in the region. In fact, in South America alone, Spanish speakers outnumber Portuguese speakers by just a few million.

Another example is that a franchisor that wants to expand in the European Union cannot assume that one method fits all 27 member states. In fact, the region has 24 official languages, and each country has its own culture and governing laws.

Therefore, as part of international expansion planning, when preparing both your documents and your training materials, do not rely on your high school foreign language skills or Google Translate. Not even the latest in AI can be completely reliable in this case. This is where using real human resources in each market you are expanding into is critical. They will know the regional names and idioms so you don’t make embarrassing mistakes in your materials. The extra step of doing so is a sign of respect; it shows that you are culturally sensitive and professional.

Related: Tips and Tricks for Navigating Cultural Differences in International Business

It’s a small country

With advances in technology, including video conferencing, messaging apps, AI-powered communication tools, and more, the world is getting smaller, and the ability to deliver services to people outside your borders is, in many ways, easier than ever. There is financial and personal satisfaction in bringing your business to another culture, but it also comes with a significant investment of time and resources to do it right. International development is not something you can get into; it is a serious commitment.

Yes, as we have always been told, nothing worthwhile comes without hard work. That hard work must be supported by a team of experts, both inside and outside the franchisor’s organization, who can successfully implement a well-thought-out international game plan.