Planning an international franchise
Australian franchises have found that it is particularly attractive to expand overseas. Statistics indicate that over one quarter of Australian based franchises have now established outlets in at least one overseas country.
To maximise the success of an international expansion, extensive planning is required and an acceptance that a realistic time frame must be taken into account.
Key issues, which need to be considered, are:
1. Is the franchise system operating satisfactorily in the home country?
2. Are franchise resources better spent maintaining growth in the home country rather than the target international country?
3. Are the motives for international expansion realistic and justified?
4. Choose the target country for your reasons and not in response to an inquiry which initially looks profitable.
5. Does the home country management have sufficient time, funding and expertise to develop an international plan?
6. Will consultants in the home country and the target country need to be located, assessed and engaged to assist in the international expansion.
7. Review the range of expansion structures to assess whether corporate, franchising, JV, agency or other method is the appropriate option within the target country.
8. Can royalties and other payments be extracted from the target country and time delays and tax rates that apply.
9. What tax treaties apply and with-holding taxes obligations.
10. Assess the language, religious and cultural differences and budget for translation and re-writing costs.
11. Select local advisors carefully as many countries do not require disclosure of conflicts of interest.
12. What is the risk of compulsory acquisition in the foreign country.
13. Investigate the level of competition that exists in the target country.
14. Learn from the experience of other foreign franchises that have expanded in to the target country.
15. Should the international expansion plan aim at the entire target country or only a defined market within that target country?
16. Consider what adaptation will be required for transferring existing systems, standards and reporting processes into the target country.
17. Can franchise staff gain work permits and be allowed to leave the country on short notice.
18. Will import duties apply to key products that need to be sent to the foreign country.
19. Reassess whether your time frames are realistic.
20. Engage in in-depth market research and reflect on this same research for improvements for your home country operations.
21. Seek out trustworthy people who can provide insight and introductions relevant to the target country.
22. Interview your senior management to establish which are willing to spend significant time in the target country.
23. Assess how you will conduct due diligence on overseas candidates as potential joint venturers, agents, suppliers, distributors and master franchisees.
24. Establish an exit plan and cost it assuming litigation is needed.
For further information contact Alan Branch on 08 8229 0972