How To Expand Your Business Through International Franchising

Unlike franchising in the franchisor’s home country, international franchising usually focuses on selling the franchise rights to a third party to operate as a master franchisee in that area. It gives them the rights to open company-owned and sub-franchise in the country or region. Discover the ways to enter this profitable business venture by reading this article. 

Types of International Franchise Models

International franchising can be an excellent opportunity for an existing franchise to expand its operations. Below are the various models that offer higher success rates than company-owned expansion.

1. Master Franchising

Master franchising is a well-known international franchise model and is one of the simplest ways to expand a franchise overseas. The franchisor chooses a master franchisee for the prospective country or region and grants them master franchise rights. Moreover, the master franchises are given rights to use and distribute the branding and marketing to open company-owned outlets and appoint franchisees. 

The number of franchise units allowed is usually specified in the master franchise agreement. Typically, master franchisees are residents of the targeted country as they are familiar with their country’s laws and regulations and market culture. 

2. Regional Franchising 

Regional franchises are ideal for a franchise model moving into a larger country or area. It can be challenging for one master franchisee to manage the franchise operations across the whole area. So, the target country is often divided into regions to operate like the master franchise. Each region comprises a regional master franchisee and sub-franchisees below them.

3. Direct Franchising

Direct franchising is a franchise model where the franchisor continues its role similarly to domestic franchising. This international franchise model requires plenty of resources and time on the part of the franchisor. They will provide franchisees with the same training, recruitment, and support as they expand rapidly.

Direct franchising is usually carried out remotely due to the centralized nature of the model. Additionally, it works better in expansion to markets with similar cultures, languages, legal systems, and regulations, such as between USA and Canada or among the Scandinavian countries.

4. Area Development

Area development is adopted in markets or sectors where sub-franchising isn’t allowed. It involves a development agreement between the original franchisor and a new franchisee. In area development agreements, the territory of a country or region is often divided into similarly regional franchising.

Advantages of International Franchising

Expanding your business through international franchising has several advantages. Brands like Fastsigns, Anytime Fitness, Subway, and Starbucks have successfully expanded outside their home markets. Here are some of the benefits of international franchising.

• International franchising can be an extremely efficient and profitable way of expanding a business overseas. 
• International franchising allows organizations to enter overseas markets, expand their products, and reach new customers. It has a lower risk than traditional company-owned expansion.
• Local franchisees can overcome language and cultural barriers to your target market. 
• The master franchisor can benefit from the franchisee’s familiarity with the local area’s regulations, political climate, and policies.

How To Become an International Franchise

International franchise models involve the evaluation of the target market and the suitability of your product or service. It should be done in a way that has value for you, your franchisees, and your customers. It would be better to understand the three significant steps in transforming your business into an international franchise. 

1. Documentation 

The documentation of a franchise includes a variety of necessary documents to establish the regulations, standards, and operations of the franchise from the very beginning of the franchising process. In an international franchise, the documentation of the franchise is critical, as day-to-day business control is decentralized to some extent in most international franchise models. 

The documentation for international franchises includes the following:

• Day-to-day franchise operations, including adapting current operations manuals to optimize the target location
• The financial models for initial start-up costs and ongoing fee structures for franchisors and franchisees.
• Support structures for franchisees
• Franchise agreements that are legally binding across territories
• Schedule for the master franchisee or regional franchisees if required.
• Training and development programs
• Marketing and branding materials and licenses
• Recruitment and marketing materials for new franchisees in the area.

2. Pilot Testing and Recruitment

Recruitment of master franchisees is essential because they have a higher level of control than franchisees in domestic models. This is particularly true of the master franchise, regional franchise, and area development models. The master franchisees are given a high level of control and responsibility over the operations of the entire country or region.  

There are consultancy services to support you through the piloting period. Once you have recruited a suitable franchisee, you will begin to pilot the franchise. The consultants will also help facilitate communication between franchisors and franchisees throughout the pilot period. Successful pilot testing ensures that good relationships are established and operations run smoothly.

3. Expansion and Growth

After the pilot period, strive to grow the organization as the franchise expands and more franchise units are added. Staff recruitment and training, franchisee training, and marketing are also necessary. In addition, the development of systems and documentation is required to ensure the longevity and success of your franchise in its new markets.

Conclusion 

Expanding your business through international franchising can be a powerful strategy to unlock new markets and accelerate growth. With the right strategies, you can successfully implement this profitable business model. However, you must conduct in-depth research, establish strong partnerships, adapt to cultural complexities, and maintain quality and consistency.