Thinking Of Cross-Border Expansion? Consider This First

Thinking Of Cross-Border Expansion? Consider This First

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Before opening your first store beyond South African borders in ask yourself if you’re a little too keen to accept new franchisees who won’t be able to keep their businesses afloat in the long term.

“Although enthusiasm can be infectious, franchisors should meet with candidates in person to evaluate their experience, credit history and references and whether their business objectives match their own before entrusting them with their brand and reputation in any new market,” advises Jennifer Dolman, litigation partner with Osler, Hoskin & Harcourt LLP.

In preparation of entering a new market, solely on the recommendation of a potential franchisee over in a neighbouring country who is keen on being your master franchisee, do the following:

1Conduct thorough local market research

A fatal blow to your successful franchise is one bad location – and market – choice away. Diligently research the country you’re planning on expanding into: The laws, customs, demographics and your potential franchisee.

The chances of your brand succeeding in your chosen country relies heavily on your awareness of local customs, tastes and practices. This research will also determine the extent to which menu items need to be adapted.

“For hamburger chains looking to expand to countries where most of the population doesn’t eat meat, menu changes will be required,” says Dolman.

“Similarly, if a restaurant system relies heavily on alcohol sales, then opening a location in a country where laws or customs prohibit the serving of alcohol would be a costly mistake.”

2Test the environment

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“Now that the theory is done, it’s time to put your findings to practice with a few pilot operations. Not only will this mitigate your likelihood of failure, but it’ll also shed light on other market complexities you may have missed during your initial research. Of course the success of master franchisees will only be as good as the franchisors’ support,” says Dolman.

“It is important to ensure they have adequate capital, resources, personnel and training. Franchisors never like to see stores close, but if their reputation is damaged in a foreign market it could take years before they can re-enter the market, if at all.”

This stage allows you back out quickly if you spot cracks that threaten your success. Although the franchisee will be responsible for the store, if he’s unable to make a success of it, it’ll impact your brand negatively in a new market that’s barely being introduced to you yet.

3Get your timing right

Succeeding in your international franchise expansion isn’t just about the foreign location you select, but its geographical proximity to the home market as well as language and cultural similarities.

In addition to these factors, experts suggest you also take the following into consideration, before taking the money and running with the idea of a potential franchisee:

  • Is there existing exchange control?
  • What degree of adaptation is required for the success and public acceptance of the concept?
  • How is the cost of supplying franchisees with the appropriate type and quality of goods and supplies calculated?

While taking your franchise beyond borders can be daunting initially, strategic implementation of such an expansion means international success. Choose the right countries at the right time, in the right way, and your company could be a step away from establishing a respected presence around the globe.

Diana Albertyn
Diana completed a BA in Journalism in 2010 and has honed her skills as a newspaper reporter, senior communications specialist and most recently worked at a weekly magazine as a writer. She joined the EMTS Group in 2016 as a writer for Entrepreneur magazine and SmartCompany Networks. Passionate about honing her writing skills and delivering exceptional client results, Diana continues to keep a finger on the pulse of industry news and insights.