Article

International franchising: 8 tips for smooth sailing overseas

The CEO of Franchise Global Frands provides eight tips for U.S. franchisors who want to go global.

August 5, 2016

By Marvin Aballi, CEO of Franchise Global Brands

Going global is an exciting proposition, but along with the enticement come real challenges to first-time restaurateurs looking abroad. Below are eight tips for U.S. franchisors to consider before making the international leap.

1. Visit Your Prospective Franchisee’s Market: A big advantage of operating U.S. stores is consistency of operations but this can change when you expand overseas, where understanding local customs, taste profiles, and sourcing new ingredients is essential to success. 
   1. Examine macro business trends and restaurant trends in the selected market.
   2. Research a country’s customs and dietary restrictions for needed menu adaptations. Contact local authorities to determine if any ingredients are prohibited for entry to the local market. As an example, many Middle East countries prohibit the consumption of pork and alcohol and serve only halal meat.
   3. Visit local supermarkets taking inventory of locally sourced ingredients if you need to make some foods from scratch or substitute local ingredients into core items.
   4. Reach out to local food distributors to educate yourself on exporting U.S. food products.
2. Elevate Your Design: Be ready to up your game with architectural design. Simple, inexpensive, and fit-out finishes won’t be accepted by local customers and your future franchisee will have a hard time acquiring new locations. 
3. Maintain Product Integrity: Stick to exporting food from the U.S. especially in the beginning.  A Middle East company operating a chain of 22 stores in 6 countries settled on a ratio of 80% US food and 20% locally sourced food after exploring and testing local market food items. This company saw guest satisfaction surge and sales grow considerably as guests appreciated U.S. ingredients.  U.S. food manufacturing, on balance, is more advanced with higher food quality than most other countries.
4. Protect Your Brand Identity: Make it a franchisee priority, harmonizing what your brand stands for and the experiences your employees and customers have. Make certain a franchisee store has a look and feel that is very similar to your U.S. locations. Playing American songs and U.S. TV channels, as an example, provides an overseas guest an equivalent ambiance. Frequently train your staff on the use of English communication skills. Staying authentic is appreciated by guests. To further explain, if you are operating a Chinese concept, you wouldn’t ask your staff to wear a U.S. style of uniform or play non-Chinese music or TV programs.
5. Do Not Be Fooled: A rich, well-capitalized prospect franchisee does not guarantee success.  Research your prospects’ other businesses and determine their level of success including interviewing a few key staff.  Very well capitalized companies, in many instances, have a short-term focus without a required attention to brand integrity and overall quality. One company operating multiple U.S. brands made the decision to switch a majority of their ingredients to locally produced products in order to save money. But in reality, this impacted food quality and taste, resulting in lower receipts, negatively impacting sales and P&L.
6. Upfront Development Fees: Let your franchisee pay for at least 50% of development fees upfront. Why? If they only pay for one store, and when they open the 1st store; if they are not profitable, they will not be incentivized to adhere to the pre-agreed upon development targets.
7. Key Franchisee Hires: Make sure you have a voice in interviewing and hiring, especially the operations manager of your franchisee, who will be running your brand internationally. They must be quality driven, training focused, maintaining and promoting high standards so your brand will reach its highest potential.
8. Hire a Franchisor Operations Field Advisor:An essential hire for the areas your franchisees operate in, not only to be your eyes and ears "on the ground" but also to provide coaching, support and monitoring to your franchisee's business. You cannot assume that after the first unit is opened and your training team flies out, that all is considered good. The relationship won't continue with the same intensity from 8,000 miles away via email and Skype.