Expanding abroad should be a carefully planned exercise undertaken by mature franchisors. It also tends to take more time and money than you’d expect
Overseas expansion is an intimidating prospect for any business owner. But for the franchisor it presents a unique set of challenges. Franchises expand by replicating the same model in each location – but will that approach work when the business enters a new territory with a different language, customs, business practices and climate? There are many examples of successful overseas expansion, but often these franchisors have adapted their models to suit their new marketplace. Therefore, this means franchisors must do their homework, find the right partners and prepare their business for this complex, yet potentially rewarding phase of growth.
Are you ready?
While the prospect of overseas expansion might be thrilling, hard questions need to be asked of the business before it moves abroad. Certainly, a franchise which is already operating on a nationwide basis is in a better position to expand overseas than one which has just a handful of territories.
Farrah Rose, the international development director at The Franchising Centre consultancy, has been actively involved in the industry for 32 years, working with over 200 brands. She says franchisors need to be well-established before expanding abroad and should expect to commit significant amounts of time and money. “Unless the domestic operation is fairly mature it will be quite difficult to expand overseas, as the owners will be torn between the two,” she says. “Businesses need to have sufficient resources to expand overseas, both financial and human.”
Stick to the plan
Successful franchises attract attention and interest from investors from all across the world. This often leads to offers to ‘take the business into Qatar’, or many other exotic- sounding locations. However, seasoned franchisors say it is wise to resist the temptation of such attractive offers and to stick to a plan instead. Paul Thompson is the founder of Water Babies, a £35m franchise business founded in 2002, which provides swimming lessons for very young children. Fairly early on in its development, the business made an attempt to expand into Australia, after a former colleague moved there and offered their help. However, before long the business realised it had over- reached and was not prepared. “Franchisees expect support wherever they are and you shouldn’t underestimate how time-consuming it is,” Thompson warns. “Australia is also very costly and it’s a long way away.”
Having learnt from his mistake, Thompson took Water Babies into Ireland and also enlisted the advice of The Franchising Centre to vet the business for suitability. It gave Water Babies a green light and helped it to plan and now the business has sold five territories in Ireland and is planning moves into the Netherlands and Germany. Thompson advises franchisors to take advice and make deliberate strategies for expansion and not to opt for what might appear to be an easy option. “I think a common mistake is to follow enquiries rather than pursuing your goals. Moving into another country is complicated and very time- consuming, also it takes time to get a return on investment. It’s not an easy fix,” he says.
Franchises operate the same wherever they are, or at least that’s the theory. However, franchisors often have to adapt their business models to suit the new environment they are operating in. Rose suggests this can be tricky for franchises and moving too far away from the core model is potentially dangerous. “The franchise will have to be adapted to suit the market. But what can happen is that the model is changed so much that it loses the element that made it so successful in the first place,” she says. “The business must not lose its soul.”
Research of the market is required and this can lead businesses to investigate some novel aspects of a country. Sophie Atkinson is the managing director of Autosmart, a Midlands-based franchise which creates and manufactures cleaning products for the motor industry. Its franchise outlets sell them across the UK and the business has also expanded into Australia, Sweden and France. However, cleaning products differ around the world and understanding this was key to moving into new territories. “Our products clean vehicles and they have to be adapted to suit the climate and cleaning methods of a country,” says Atkinson. “France was fairly straightforward as it is close to the UK geographically and in terms of climate.”
Countries which are similar and close by are potentially the best first targets for businesses new to international expansion. Ireland is the first port of call for many expanding franchisors, offering similarities, but also differences. David Paulson is the senior manager for franchise recruitment for Tax Assist, an accountancy franchisor aimed at small businesses. He says Ireland was a good first move for the business, which is now planning moves into Australia, the US and Canada. “Ireland has a different currency, business culture and tax laws so we treat it as a different country and it helped us to understand what was required when selling master franchises.”
Sophie Atkinson, managing director of Autosmart, explains how her business prepared and made its successful expansion into France
“We chose France because the climate is similar to the UK and the cleaning methods similar to Sweden. France has a franchising infrastructure already in place making it easier for franchisees to raise money, and finally we chose France because of its closeness geographically.
“We went to the French Franchise Association which was very helpful, and we set up our own pilot with our sales director Chris Ashton. Chris brushed up his French for over a year, and moved to France with his family and found all the local contacts.
“Today, we have seven French staff who are based across France and are responsible for recruiting and training our franchisees. We also have eight bilingual staff here in the Midlands who work across our departments, supporting France.
“It may seem crazy but at first we translated our UK staff contracts into French and thought that it was OK to offer French staff English terms and conditions. Thankfully, this didn’t cause any problems and we found a good lawyer to sort them out and get new contracts drawn up.”