Franchisors Eye International Expansion

The U.S. economy has battered growth for some franchises and more franchisors are looking overseas for more opportunities to expand. Mike Shattuck, president of international brands for Focus …

The U.S. economy has battered growth for some franchises and more franchisors are looking overseas for more opportunities to expand. Mike Shattuck, president of international brands for Focus Brands – owner of Seattle’s Best Coffee, Cinnabon, Auntie Anne’s and others – discusses the keys to success in international franchising. Shattuck says important considerations when making the shift overseas are choosing the right franchisee, being prepared to build a support network that may take time and being able to tweak the model to account for cultural nuance. Many franchises have survived and thrived in foreign markets, he says, and there is ample room for growth for many U.S. brands. For more on this continue reading the following article from TheStreet.

The 2008-09 recession put a sharp crimp in franchise expansion across the U.S. — popular brand names as well as small, emerging franchises getting their feet wet. Many franchised companies are still feeling the effects from the gruesome economy and lack of capital access.

But outside the U.S. there are markets such as India, Indonesia and Brazil ripe with opportunity, according to franchise industry experts.

Operating international franchises may require changes to the model, whether that’s to adhere to cultural idiosyncrasies or regulatory laws.

Mike Shattuck, president of international brands with Focus Brands, which owns food-related franchises including Carvel, Cinnabon, Auntie Anne’s, Seattle’s Best Coffee and Schlotzky’s, among others, offers some best practices to expanding internationally.

How do you build a model that can be replicated even outside the U.S.?

Shattuck: You need to understand you’re probably going to have to adapt your concept or your brand in nearly every market. Coming to the realization that you will need to make that adaption is the first thing.

In many cases it may be a tweak on the menu such as portion size in Asian markets. Sometimes if your product has a spicy profile you might have to take that down a bit — or up a bit. You’ll want to have in India a level of vegetarian classification. You’re not going to go into India with beef.

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Secondly, are you sure that you are committed? You can’t do international expansion of a franchised concept halfway. You have to be committed to it. Having spent nearly 30 years in international franchising I still see people take brands overseas, but they’re not really ready to make that type of commitment.

If you look at it as a wide-open space where you make a lot of money — and you can — but you’re going to [make an] investment upfront. You’re going to have to build some infrastructure to support it. Selling the franchise is step one. You have to be able to support it, just like you would here, only you’re starting many times from scratch.

How do you build brand loyalty?

Shattuck: It’s not really that much different than it is here. It’s all about providing good, quality foods in a friendly environment. The basics are definitely transferrable. Your target market, your position, you may tweak that, but you’re still in the business of providing value for your money.

What are some common mistakes made by franchises that go international?

Shattuck: Understanding who that franchise partner should be. Oftentimes that’s a mistake that’s made and then you’re in a difficult situation from the beginning.

Many times restaurant brands are more difficult than snack brands. With a restaurant brand, it can easily take two to three years to get to the point where you start realizing a return on the investment.

How much should a franchise change to respond to cultural differences?

Shattuck: To me there is a core essence and being of every brand. And at some point [franchisors] need to question, ‘Is that being compromised by doing this product or by doing this type of prototype or design?’ For example, Cinnabon. One of the things is the product is always baked fresh. If you were to move from that — that is part of the essence of that brand.

How do you find the right operator abroad?

Shattuck: There are a lot of avenues. One that often gets overlooked is the U.S. Commercial Services. We worked with them a lot to introduce us to possible candidates. Initially, that’s a great place to start as you build your brands. As you create a network, a lot of it will come from referrals and current partners.

Can you think of a brand whose international expansion didn’t work?

Shattuck: If you look back historically at Carvel, at one point it was in several markets overseas — South Africa, China — but they never really had the infrastructure to support it. They never committed to it.

This article was republished wtih permission from TheStreet.


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