The International Franchise Association reports that 38 percent of the unit growth of the 200 biggest American franchisors come from overseas. If figures are considered for the last three years, then 80 percent of these companies' collective unit growth has happened outside America. This kind of growth, as per Josh Merin of International Franchise Association, is set to continue. Merin, who holds the post of director at the company, said that a fresh set of US companies are thinking of making global strides for the first time. Restaurant chains are prominent in this list. Chick-fil-A of Atlanta and Sonic Drive-In of Oklahoma City are two of the prominent names considering taking this step.
Adaptation is key
The problem in such cases is to introduce a US product to a vastly different culture. Other than the standard challenges and pressures linked with franchising, the franchisees and the franchisors operating in the foreign markets must tackle unstable political climates and idiosyncratic business environments. There could be unfamiliar cultural norms as well. Such hurdles could turn out to be surprisingly hard, needing hard work, careful attention, and good money of both individual and corporate franchisees to adapt products to local customs and tastes. This must be done sans sacrificing the innate identity of the brand.
Risks and rewards
Adding to the lure of expanding overseas is the present US economic climate. Franchising now presents two distinct opportunities. According to Mark Siebert of iFranchise Group, although developed markets come with better infrastructure supporting real estate, supply chain, and banking needs, competition could be tough. In contrast, the emerging markets will have basic business frameworks, but the new movers will have the undeniable advantage of fewer rivals. They could also obtain better deals from new offices and shopping malls.
One factor clearly stands out. If any concept must succeed in any new market, the franchisees and the franchisors must make a few adjustments to the original business plan. To give an example, any US concept taken to Japan must be shrunk. These will range from the premises' size to consumer goods' packaging. Residential apartments must also be commensurately compact. Other changes are dependent on the minds of the local people. An example of these are the local scents made especially for the Asian market. Cultural chasms must also be crossed. A system which performed well in the US does not mean that it will do well in China or Korea.