Franchise Update Magazine Issue II, 2014 | Page 54

Grow Market Lead
52

Market
trends

BY DARRELL JOHNSON
AND ERIC SIMON

A Call for Global Standards
International expansion demands better information

O

ver the past seven years, some
economies have prospered
while the U.S. has been
on a roller-coaster ride.
With franchising’s ability to respond
relatively quickly to change, it comes
as no surprise that we are seeing more
focus on international expansion by U.S.
brands. We have seen an increase in international research projects ourselves
and addressed this trend by starting a
research company in Australia.
In the U.S., we are accustomed to being able to obtain, from both public and
private sources, a considerable amount
of reliable franchise information. The
amount and quality of international information on franchising pales in comparison. Brands typically are left to rely
on consultants and their own experience.
International franchise information, when
available at all, is scattered among government agencies, franchise associations,
and within individual brands, with varying degrees of reliability. Maybe we can
change all this.
The lure of global expansion can be
exciting, risky, and rewarding for franchise brands and multi-unit owners
alike. Taking a brand overseas can feel
like a rite of passage to adulthood and
further validation of the brand’s appeal.
International development can be a lot
like diversifying a stock portfolio. Stocks
go up and down, and as we have seen,
economies do the same.
So where does a brand begin with
international due diligence? How does
it determine what countries best fit its
products and services? Have similar brands
entered the same market, and, if so, have
they failed or succeeded? (Franchising
has a big advantage in this regard because of the uniformity and conformity
of the model itself.) How is operational
success measured internationally with
no reputable benchmarks or consistency
Franchiseupdate ISS U E II, 2 0 1 4

of definitions? What metrics should be
used? How does a brand confirm that
its action plans are realistic and on the
right time line? How are faults within
international operations identified, and
what adjustments are consistent with
good business practices?
Clearly, when expanding internationally there is great value if good information and benchmarking indicators
are available to help franchise brands
and their multi-unit operators reduce
uncertainty and mitigate risk. Having
a source for capturing and analyzing
international information will allow
franchise brands to make better decisions on which countries to penetrate,
how to find and provide better support
services to their overseas partners, and
ultimately ensure that development plans,
operational performances, and ROI are
in line with the current business plan.
As with most research projects we
work on, we begin with the end in mind.
What business decisions will be made
for which reliable information would
help? It seems that they fall into three
categories: whether to enter a particular
country, how to measure if operations
are in line with best practices, and if
performance is in line with maximizing outcomes over time. Next comes
identifying the right information to
collect, using consistent definitions for
that information, and creating the right
win/win relationships with the people
who have the information (including
addressing confidentiality of the information from private sources).
FRANdata is teaming up with Bill
Edwards, founder of Edwards Global
Services (see page 54), to tackle this information gap in international franchising. Our two companies, along with Josh
Merin, director of international affairs
at the IFA, are beginning work on an
international database to answer these

and other questions.
We started by identifying what type
of information franchisors have, and
what information would add the most
value for business decisions. This led us
to the following key information we’re
using as a starting point to compile data
on U.S., international, and local country
franchise brands by country.
1) System level: number of franchise
units, number of master licensees, initial
unit investment (franchise fee, royalty
fee, marketing fee), number of multi-unit
franchisees, start date of doing business,
franchisee finance options, number of
unit closures, franchisor revenue, franchisor international expenses, percentage of
franc