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Expanding your franchise concept internationally is a challenging decision. It can offer tremendous growth opportunities beyond your current home market. However, doing this too soon could place undue stress on your system as you attempt to replicate your US operations for a culturally different population while managing domestic expansion and support.
Before expanding into new international markets, ensure that your business concept is thoroughly developed, that all intellectual property is registered and trademarked, that marketing materials and manuals are translated, and that you have a local team in your target markets Assisted you with implementation and troubleshooting.
Inexperienced franchisors should avoid rushing into international expansion without conducting thorough research and laying the right foundations. Due to distances, language barriers and cultural differences, international units can be more challenging than domestic ones. It is important to ensure that your products or services are needed or wanted in your international target market.
So if it's such a big challenge, why don't we just stick with expanding domestic units and leave out the international issues? For one thing, the ability to launch your products or services in new, untapped markets can mean a significant increase in sales, especially if you're running out of areas to develop domestically. Another plus point is that many foreign consumer markets are interested in US concepts. Best of all, American franchises are usually considered a solid investment because of the proven systems and training they offer.
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Successful franchising always depends on seeking expert advice and support, but nowhere is this more important than expanding into international markets. You need to work with franchising and legal experts who specialize in international franchising and have knowledge of the countries you are targeting. You will have a network of colleagues with extensive knowledge of the laws, regulations, and political and business climate of the markets you explore. Before you invest in an international program, these experts can help you narrow down the countries or regions where your concept will work.
Other important considerations for international franchise expansion include:
- The all-important political and economic stability of the target district.
- The country's franchise regulations or laws. Most countries have corporate regulations in place to protect their citizens, but only a handful of countries have specific franchise registration requirements that must be adhered to.
- Evaluate how easy or complex it is to bring products into the country. For certain proprietary items, you need to set up appropriate logistics to get them there. Or if you plan to source products locally, you need local connections to build a reliable local supply chain.
- How to efficiently remit license and advertising fees back to the US. Remember that you also have to deal with the exchange rate, transfer fees and local banking regulations.
- We find the right partners who are financially able to expand your concept beyond just one unit. Various legal forms can be used, from granting a franchise directly to an individual or group, to creating a separate entity via a master franchise agreement for each country, where your master franchisee grants the rights to individual franchises and these local franchise units supported.
Again, your trusted advisors can advise you on the best structure for your concept and the country in which it will be implemented. Getting to know your partners is crucial. You need to be comfortable with them as people and be well informed about their other partners and companies they may own. Both parties must follow transparency laws that require disclosure of all companies with which they are affiliated, their owners and the people who make the decisions. You need to know where the money invested in your concept comes from.
Side note: It goes without saying that the same care and expert support is required when a concept comes into the United States from another country or region as is required for US-based concepts going abroad. International franchisors also need to find trusted local franchise advisors and attorneys to help them transition from a national or regional approach to an international approach when entering the U.S. market.
Where should you expand first?
Because of its proximity and the fact that English is the native language in most parts of the country, Canada has long been the first choice for many U.S. franchisors' international expansion. But don't be fooled into thinking that Canadian culture and business environments are no different than those of the United States. Mexico is often the first port of call for U.S. franchisors looking to expand into Latin America due to its geographic proximity, but there are also many linguistic and cultural differences.
For example, let's say you expand your concept to Latin America; Not only does Spanish in this region vary from country to country, it is also important to know that Spanish is not the only language spoken in the region. In fact, in South America alone, the number of Spanish speakers exceeds the number of Portuguese speakers by only a few million people.
Another example is that a franchisor looking to expand in the European Union cannot assume that a single approach will work for all 27 member countries. In fact, there are 24 official languages in the region and each country has its own culture and rules.
Therefore, when planning your international expansion, do not rely on your high school foreign language skills or Google Translate to prepare both your documents and your training materials. In this case, not even the latest AI is likely to be completely reliable. This is when it is crucial to deploy actual human resources in each market you expand into. They know the regional vocabulary and phrases used, so you don't make embarrassing mistakes in your materials. The extra step is also a sign of respect; It shows that you are culturally sensitive and professional.
Related: Tips and Strategies for Managing Cultural Differences in International Business
It's a small world
With technological advances like video conferencing, messaging apps, AI-powered communication tools and more, the world is getting smaller and the ability to provide services to people beyond your own borders is in many ways easier than ever. Bringing your company to a different culture is both financially and personally satisfying, but it requires extensive time and resource investment to do it right. International development is not something you can dabble in; it is a serious commitment.
Of course, we have always been told that without hard work nothing worthwhile comes about. This hard work must be supported by a team of experts both within and outside the franchisor organization who can effectively implement a well-thought-out international game plan.