Everything You Need To Know To Make Your Franchise A Global Success
“96 percent of the world’s consumers and over three-quarters of the world’s purchasing power are outside of the United States”, US SBA Administrator.
“Nearly 90% of the next one billion people to attain middle-class status will be in Asia.” Homi Kharas, Brookings Institution.
“As Globalization has taken hold over the last 20 years, international growth has become a “must” for any company seeking high rates of sustained future growth.” Catherine Monson, CEO, FASTSIGNS and Chair, International Franchise Association.
Running a successful and profitable franchise is a good way to accumulate wealth and become a high net worth businessperson and entrepreneur. However, you will need to be well educated, and maybe even a certified franchise expert, if you want to see your franchise make a lot of money.
A recent survey of Franchisor members of the International Franchise Association indicated more than 80% were either international or planned to go global this decade. Having helped 40+ franchisors take their brand global, here are the questions most people have:
- Which countries have the highest potential for our specific brand?
- What is the best international development model for our specific franchise?
- Will our brand fit into the culture of other countries?
- Will we have to change our training, support, and marketing programs?
- Can we eventually make a good return on our international investment?
- What does it cost to develop our franchise outside our home country?
To answers these questions, let’s answer the why, when, how, where and with whom of taking a franchise international
Why Take Your Franchise International?
- Add new sources of franchise fees, royalties and product sales
- Reduce dependence on your home country market
- Leverage your existing technology, know-how and intellectual property
- Improved economies of scale through network growth
- Become a franchise expert
When should you take your franchise international?
- 10 units or 250 units? The number of units is not the best measure of being ready
- When your business management technology and Intranet are robust
- When you have applied for a trademark before seeking a licensee in a country
- When your training, marketing, and support resources are online
- when you’ve become familiar to franchising and an expert in the domain
- But, most of all, when you have a plan to succeed
How – The International Development Options
- Master Franchise – Franchisor grants exclusive rights for a country to one company or expert, often with the right to sub-franchise
- Area or Regional Franchise – Franchisor grants exclusive rights for part of a country. The most common method for food franchises
- Direct Franchise – Franchisor awards expert or certified franchisees and directly supports their Franchisees in a country
- Joint Venture License – Franchisor jointly invests, owns, and develops the business in a country with a local company
- Direct Investment – Franchisor owns and operates all units in a country.
Where should you take your franchise?
- Rule of Law and IP Protection – this is needed to protect your brand over time
- Country Stability – this is needed to be able to start and grow your brand
- Your consumer market size – who can. And will want to buy at your franchise
- Culture – adaptation, but not changing the brand
- Ability to get paid in a timely manner, not all countries allow freedom of payments
- Potential to Achieve An Acceptable ROI – you will have costs associated with fees
And with whom? Your international licensee should have these attributes:
- A passion for and understanding of your business
- Successful company with expert experience in appropriate sectors
- Good reputation in the country
- Experienced management to put into the business
- Access to suitable real estate
- Marketing oriented company
- Capital to start and grow your business in their country
- Preferably a licensed or certified expert themselves
A Proven International Development Strategy
- Budget conservatively for the first 3-5 years of international developments
- Be realistic in your initial fee expectations
- Realize that initial fee revenues have associated expenses over time
- Be realistic in how many countries you can award and properly support
- Plan ahead for marketing, training, and support costs
William Edwards, CFE, is CEO of Edwards Global Services (EGS) and a global advisor to CEOs. He has 47 years of expert international experience and has lived in 7 countries. He has been a certified Franchisor, an International Master Franchisee in 5 countries, and has assisted more than 40 franchisors in their global development. bedwards@edwardsglobal.com +1-949-224-3896. For more information on the Certified Franchise Executive program, please go to this link: http://bit.ly/3ulCfpE
Asia Biweekly Business Update Blog – 4/27/2020
(This is an update of our March 9, 2020 China Blog which now will cover Asia)
Bill Edwards, CEO of Edwards Global Services, Inc. (EGS), has been doing business in China for 45 years, including living in China, Hong Kong and Indonesia. EGS is currently helping U.S. brands enter Cambodia, Mainland China, Hong Kong, Indonesia, Korea, the Philippines and Thailand. Our U.S. Clients are all consumer-faced franchise brands.
The following are extracts from a variety of information sources and our Associates across Asia on consumer-focused issues during the COVID emergency.
Introduction
Mainland China and South Korea are seeing businesses starting to reopen. Singapore and Malaysia remain shut down. Indonesia and the Philippines are allowing restaurants to do takeaway and delivery only. Japan is mixed. Vietnam has done a good job controlling the virus and will soon allow businesses to reopen. Thailand will start reopening the week of May 4th. Ramadan, which lasts until May 23rd, is a challenge for businesses in Indonesia and Malaysia.
Asia General
“From coffee in Hong Kong to burgers in Malaysia and Ramadan in Singapore – here’s how Asia’s small businesses cope with Covid-19. Asia’s SMEs are rising to the challenges posed by the coronavirus by adapting their business models and focusing on the positives. Here are five case studies, taken from across the region, of how SMEs are adapting to the challenges posed by Covid-19 – and proving that even the smallest of businesses can have the biggest of hearts.” South China Morning Post, 4/25/2020
“In Indonesia, the world’s most populous Muslim country, hundreds of millions are unable to congregate during the holy month of Ramadan. Muslims in neighbouring Singapore and Malaysia are also having a more solemn Ramadan as Covid-19 social distancing rules are enforced.” South China Morning Post, April 24, 2020
https://bit.ly/MelancholyRamadan
Mainland China
“Co-founder of Microsoft Bill Gates announced that stores of the company in China had resumed their operations that may be a concrete example of how society may return to ‘business as usual.’ Microsoft already sent thousands of its workers back to China, where they would resume their posts and comply with precautionary measures to prevent the spread of the pandemic.” Business Times, April 24th, 2020
AmCham China has released the results of a second Flash Survey that evaluates the impact of the COVID-19 outbreak on its member companies. Almost 120 companies responded to the survey. Roughly half of the surveyed members say they are experiencing significant revenue declines, compared with 28% last month. 39% of companies report a drop in demand for their products, up 6 percentage points from last month. 60% (up 10 percentage points month-on-month) said 2020 revenues will decline anywhere between 10% and 50% or more if business cannot return to normal before August 30. Read the full AmCham China Quarterly report at this link:
https://bit.ly/AmChamChinaQuarterly
Indonesia
“Indonesia to ban air, sea travel to end-May: officials. Indonesia will temporarily ban domestic and international air and sea travel, with some exceptions, starting this week to prevent a further spread of the coronavirus, the transport ministry said in a statement on Friday. The announcement came as the holy month of Ramadan began in the world’s largest Muslim majority country, and the government has already banned citizens’ traditional annual exodus from the cities to the provinces during the holiday period.” Reuters, April 23, 2020
“With most schools and universities in Jakarta (Indonesia) shut down even before official rules on social distancing went into effect, the transition has been sudden and uncertain for many. With Large Scale Physical Distancing extended in Jakarta until at least May 22, schools will continue to function online. AmCham (Indonesia) held a special forum on the situation on Thursday, April 23, to look at the challenges for schools, students and parents.” Learn more about the conference findings at this link:
https://bit.ly/AmChamIndonesiaSchools
Japan
“In recent weeks, the number of covid-19 cases has increased, and Prime Minister Shinzo Abe has called for an 80 percent reduction in person-to-person contact. Yet, some pachinko parlors refuse to close. Earlier this month, Tokyo Governor Yuriko Koike included pachinko parlors, along with bars and clubs, in the establishments she was requesting shut down to reduce the spread of the novel coronavirus. Many pachinko parlors followed the request, but some did not.” Kotaru, April 23, 2020. See pictures the lack of social distancing at this link:
“Japan’s new economic stimulus package in response to the coronavirus pandemic is estimated to boost real gross domestic product by about 4.4%, Economy Minister Yasutoshi Nishimura said on Friday. Japan has boosted its new economic stimulus package to a record $1.1 trillion to expand cash payouts to its citizens, as the fallout from the coronavirus pandemic threatens to push the world’s third-largest economy deeper into recession.: Reuters, April 23, 2020
Malaysia
Malaysia has one of the highest COVID cases and death counts in Asia. Essentially all business is closed. A major challenge for the Ramadan period.
“The (Malaysian) Prime Minister announced that the MCO (movement control order) which was first imposed on March 18 to 31 and later continued with a second phase from April 1 to 14, and a third phase from April 15 to 28 – would be on for a further two weeks. The government, said the Prime Minister, was considering allowing more specified sectors and sub-sectors to resume operations but subject to strict conditions to ensure the people’s health and safety.” The Star, April 23, 2020
https://bit.ly/MalaysiaShutDownExtended
Philippines
In the Philippines, the almost total business lock down is slightly easing. Some Chili’s® and Denny’s® restaurants have reopened for takeaway and delivery. But local sources say the Manila government has issued passes, only one selected member of each household is permitted to go out for food, groceries and to pharmacies.
“The coronavirus outbreak will likely send the Philippine economy into its first annual contraction in more than two decades this year, before it pulls back up for a U-shaped recovery in 2021, the central bank governor said on Saturday. Key cities in the Philippines, among the fastest growing economies in Asia during the pre-pandemic period, are under strict quarantine measures since mid-March. Philippine gross domestic product would likely shrink by 0.2% in 2020 before bouncing back to about 7.7% as policy support measures gain traction, central bank Governor Benjamin Diokno said in a statement.” Reuters, April 25, 2020
Singapore
Singapore has been under a partial lockdown since April 7 that may be extended past May 4 due to the recent jump in coronavirus cases in migrant workers. Many businesses, especially F&B, are suffering and may have to close for business due to the Covid-19 pandemic. The Singapore government has come out with a S$60 billion (US$40+ billion) budget to help businesses, employers, employees, & citizens.
South Korea
Churches, bars, gyms, restaurants are starting to reopen. Travel is not doing well. 400 McDonald’s are open for drive through. From 900 new COVID cases on February 29th, there were 8 new cases on April 23rd. “Amid the rapid changes caused by COVID-19, there is optimistic recovery progress of American businesses in Korea. Many companies are adapting quickly and finding success in unexpected ways amid these times of uncertainty.” James Kim, Chairman and CEO of AmCham Korea. This link is to a CNBC interview with Mr. Kim:
https://www.youtube.com/watch?v=0l3oVv2wJYo&t=2s
Early in the coronavirus timeline, Korea created an app that kept track of infected people. It prohibited large gatherings and required virtual church services. Key was wide spread testing. They even had an election.
Thailand
AMCHAM Thailand had a Video Conference on April 22. Here are some of takeaways: The ban on sale of alcohol beverages has been extended until the end of the month (April 30) to discourage further social gatherings. All foreigners have been granted automatic visa extension for another 3 months until July 31. It is estimated that Thailand will end the year with just over 16 million international tourists, far below the 40 million goal. However, they have stated that tourism activities in Thailand could resume as early as May. AmCham Thailand members remain vastly positive toward the measures taken by the Thai government to curb the spread of Covid-19. See the full results are the link below:
Although the number of new COVID-19 cases in Thailand had a sharp drop to 15 cases on 26 April 2020, the state of emergency is extended another month to end on May 31, 2020. The Centre for Covid-19 Situation Administration (CCSA) issued the guideline of the preparation to reopen the businesses under the Covid-19 situation. High-risk business such as bars, pubs, entertainment venues will remain closed. Medium-risk business such as barber shops, spa, restaurants, department stores and shopping malls would be allowed to reopen gradually. All airports in Thailand are expected to resume their services on the 1st of May after they have closed temporary for a month.
The Thai Cabinet approved a stimulus package for soft loans to help businesses. For example, a 6-month debt moratorium on principal and interest for SMEs. “Seth” Sethaphong Phadungpisuth, CFE, Managing Director of Gnosis Company Limited, Thailand.
Vietnam
Sean Ngo, CEO of VF Franchise Consulting based in Ho Chi Minh City, reports on LinkedIn that Vietnam will be one of the first, if not the first country, in Southeast Asia to cautiously lift the lockdown. Social distancing, temperature checks at businesses, and better hygiene practices will not change. See the full US News report at the following link:
In Summary
We keep our thumb on pulse of the Asia business market, monitoring daily changes and trends, and have insight on how you can protect and grow your brand in this critical market. We will update this Asia business climate blog about every other week.
Feel free to reach out to Bill Edwards, CEO of Edwards Global Services, Inc., (EGS) to ask questions or share best practices at +1 949 375 1896 or bedwards@edwardsglobal.com.
“It is not the strongest or the most intelligent who will survive but those who can best manage change”. Darwin
The Fastest 2 Minutes in International Business
Our GlobalTeam™ of highly experienced international project managers – on the ground in 32 countries – contributed to the following brief summary of the franchise world opportunities for 4th quarter 2015.
| Asia | China Japan Malaysia Mongolia The Philippines Thailand Viet Nam |
Watch the consumer economy not the overall GDP growth. Large corporations are investing in new consumer projects. Ringgit drop of 25% against the US$ plus political unrest. US pizza and coffee franchises flourishing. Seriously. Middle class buying power accelerating. Stable politics. Military dictatorships often are stable. US sailors on shore leave, 6%+ GDP growth. |
| Americas | Argentina Brazil Canada Chile Colombia Mexico Peru USA |
You still get paid in soybeans, if at all. Economy is stalled, inflation climbing, corruption rife. Tim Horton’s and Burger King are now one??? New President negative on business. Investment stopped. Show me the money and where it came from. Mexico City, Monterrey and Cancun booming. Lima is a city of cranes and new foreign F&B brands. US$15/hour minimum wage means no margins, less jobs. |
| Europe | Ireland Germany Poland Russia Spain Turkey United Kingdom |
GDP growth of 3.5% projected for 2016. Difficult to find investors/risk takers for new foreign brands. 3.5% GDP growth for 2015 is the highest in the EU. Foreign brands with US$ denominated rents are closed GDP growth for 2016 estimated to be 2.6%. Political unrest leading to drop in new project investment. 2.4% GDP growth, but normal investment analysis paralysis. |
| Middle East | Egypt Saudi Arabia Dubai |
Pent up consumer demand, high growth but scary security. Challenges to get new businesses open due to regulations. New building push, large expat influx, airport & airline soaring. |
| Elsewhere | Australia India South Africa |
GDP growth of 2.6% but falling commodity exports. Jobs iffy? Not another country, another universe. Low growth, high unemployment (25%), low new investment |
Infographics for the Franchise Sector
Wikipedia defines an infographic as “graphic visual representations of information, data or knowledge intended to present complex information quickly and clearly.”
http://en.wikipedia.org/wiki/Infographic
Our world moves so fast today that it is hard to get people to read long articles and sometimes even bullet point slides with few words. Infographics help overcome this barrier to communication. Infographics are simply quick to read and easy to understand data visualizations.
In the franchise industry – comprised of 75 different business sectors and over 3,000 brands in the U.S. – the International Franchise Association (IFA) does an excellent job of keeping its members up to date on franchising today through two infographics.
The first can be downloaded at the following link and quickly explains the scope of franchising in the U.S. today: almost 800,000 franchised business locations in the U.S. directly employing over 8.5 million people and producing 839 billion in economic output a year. This infographic also shows the different types of franchises. Food and hospitality accounts for 65% of all franchises in the USA.
http://emarket.franchise.org/EconomicOutlookInfographic2014.pdf
ADP, the payroll people who project employment from month to month, have recently started issuing a monthly National Franchise Report infographic that shows how many franchise related jobs were added and in which sectors. This PDFed infographic also shows graphically which industry sectors added and lost jobs during the month
http://www.adpemploymentreport.com/2013/December/NFR/docs/NFRDecember2013.pdf
There is an immense amount of data on these two one-page infographics that are easy to scan quickly instead of reading a long and detailed report, which most humans are now hesitant to do!
