8 common mistakes made by franchisors when expanding overseas

By Gidon Rosing & Dr. Yong Neng, Chow

These days, the world is one large marketplace, especially with Social Media, extensive travel and how we interact and share everything with our contacts / network.

It is perhaps the ultimate objective for a franchise brand to extend its wings beyond its national borders. However, before you take that plunge, from our team’s experience, there are Eight Common Mistakes made by Franchisors that you should seriously contemplate. These are as listed below:

#1 – Intellectual Property (IP) protection

Think global from the start so as soon as your brand launches its website and the world can see the details, a plan is needed for the countries your brand will expand into where you should secure your domain there as well (before others do). You should also seek legal advice regarding trademarks relating to your brand and making sure that your franchise agreement is adaptable for other countries’ local regulations.

#2 – Being under-resourced (people and funding)

Many franchisors have successful businesses in their own country of origin but are not aware of the resources they need to allocate towards supporting their global growth plans. Clear objectives, timelines and budgets need to be put in place so this exciting expansion has the best chance of success. Many additional items need to be looked at in a different way, as investments not expenses. For example – exhibitions, trade delegations, market research, local consultants in new markets, marketing initiatives, market visits and more. In addition, the brand should have a dedicated team member (or a team when needed) look after the international part of the business (this can be an in-house person or trained external specialist/s).

#3 – Awareness of different cultures

A keen sense of awareness of different culture overseas is one of the most important and sensitive aspects that needs to be carefully considered when looking to expand into new countries. The brand owners need to find out more about local culture, traditions, events and sensitivities. This is also demonstrated when looking to translate contracts, menu items, marketing material and more. It is critical to have a local contact who understands what it takes to succeed in the new market you wish to enter and be on your side every step of the way.

#4 – Ignoring global trends

These days, when information is abundant through the internet and social media, it is not easy to know what is up to date and relevant to your growth plans. You must know how to separate the wheat from the chaff! This could affect your decision making process and outcome, which could ultimately be one of your success factors or potentially lead to damaging your brand and overall business (even in your local market). Trends are ever-changing and every market has its own unique characteristics which should be looked into through newsletters, networking events, trade delegations and trusted advisers.

#5 – Travel, time-zones and communication

When exploring new markets, franchisors are expected to visit multiple times in order to learn about the local culture and meet people who know these markets and can help with planning on the best ways to enter the market. In addition when dealing with people in other time-zones, it is important to take that into account when planning conference calls or even waiting for feedback on certain issues. Sometimes business owners need to be flexible and be willing to work before or after normal work hours so communication is smoother. To build a successful long lasting relationship, communication is essential, especially when dealing with people in other markets when you do not see each other on a daily basis. Video conferencing, if there is sufficient bandwidth, should always be your preferred mode of communication consider over emails and telephone conversation where eye-to-eye contact is facilitated and thus trusts can be more readily forged between the parties.

#6 – Being inflexible

Unfortunately many brand owners miss out on fantastic deals with ideal partners after large investments of time (in some cases months or even years) and money (in the many thousands) due to lack of flexibility. It is very important that the brand owner is clear on the brand values and wanting these implemented in the new market, but sometimes the way to execute these needs to be left to the local potential partner. As in every good relationship, both sides need some flexibility – leading up to doing a deal and of course also on an ongoing basis.

#7 – Not having a local credible representative

Most people like dealing with a local person who understands the market conditions, while also sharing their culture. Many brand owners realize quickly that it not only makes sense from a practical point of view, but also from a cost one. It is so much more cost effective to have a local credible person representing your brand than you travel back and forth trying to learn about the market, find a potential partner, then follow up and try and close a mutually agreeable deal. In addition, the local person who you entrust with your brand representation should have their own qualified network of potential investors and service providers to help make this process easier and smoother. In addition, the chance of success increases dramatically when you work closely with your proven local representative.

#8 Not learning to work within local regulatory framework

The rules, the laws and even definition of what constitutes a franchise differ in different country. Learning about these variations as well as the general regulatory framework relating to business operations, foreign investments and repatriation of funds prior to committing your plan to action is key to a successful overseas expansion. As in #7, if you have a credible local representative, he/she should be able to guide you well, but before you proceed with your expansion plan (and find that local representative), you should know the basics of the “rule of the game” and evaluate the risks and related factors relating to your expansion plan.

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