Franchise Update Magazine Issue IV, 2013 | Page 62

Grow Market Lead

International
By BILL Edwards

Going Global

I

Overseas growth for U.S. franchisors
to continue in 2014

n 2013, U.S. franchisors of all sizes
and from all sectors are “going
global” with their brands. Is this
a temporary trend, or a long-term
strategy decision? Over the past several
months, the IFA analyzed their franchisor members’ current and planned
international development and found
the following:
• More than one-third of the units of
the 200 largest U.S.-based franchisors
are outside the U.S.
• Predictions are that this share will
increase to one-half by the end of this
decade.
• International franchising, once
limited to the largest franchisors, has
now become part of the business plans
of smaller franchisors.
• What was once thought of as reserved for food, car rental, and hospitality
franchises now can be found across the
full spectrum of industries.
• These trends seem likely to continue
for the foreseeable future. In IFA surveys
of its franchisor members, roughly 80
percent responded that they already do,
are planning to begin, or will accelerate international franchising—and that
it is important to the company’s future.

2014 outlook

With this in mind, let’s take a brief look
at how 2014 looks as a year for global
franchising by U.S. brands. Projected
growth rates (see chart) are based on
published sources plus a brief survey of
franchise specialists around the world.
As a start, a recent World Bank study
found a correlation between the growth
rate of a country’s gross domestic product (GDP) and new investment in new
businesses, i.e., if a country’s annual
GDP growth rate exceeds 4 percent,
that country will have new investment
in new businesses. Countries with GDP
growth rates between 2 and 3 percent are
also good markets to seek international
franchisees in 2014. Below that, not so
much or none. In parts of Europe the
GDP growth rate is actually negative.
Since a new international license for
a U.S. franchisor means the start-up of a
new business, we probably should focus
on those countries with expected GDP
growth of 4 percent or more in 2014.
Asia/Pacific

China, Indonesia, and the Philippines are
seeing a high level of franchise activity
and have high GDP growth projections
for 2014. Other countries in this region

Projected 2014 GDP Growth Rates for Selected Franchise-Friendly Countries
China

South Africa

3.3%

Philippines

6.6%

New Zealand

3.3%

India

6.1%

U.S.A.

2.7%

Vietnam

5.5%

Australia

2.7%

Indonesia

5.4%

Brazil

2.5%

Saudi Arabia

5.1%

Canada

4.9%

U.K.

2.1%

Turkey

4.6%

Japan

1.5%

Colombia

4.3%

Ireland

1.1%

Mexico

3.9%

Europe

The deep recession in Europe has brought
unemployment rates of 20 to 25 percent,
negative GDP growth rates, and little
new investment. According to many
published sources, these numbers will
begin to improve in 2014. Already there
is increased interest in U.S. franchises
in Ireland, Spain, and the U.K.
Latin America

The high level of U.S. franchises entering this region in 2013 will continue.
Particularly active are Chile, Colombia, Panama, and Peru. In recent years,
Colombia and Peru have gone from
poor economies to rapid growth countries with lots of construction cranes in
their major cities and rapidly increasing
consumer spending. In Brazil, increased
barriers to entry are resulting in little
new foreign franchise development. In
Argentina, economic and legal problems
are limiting development.
Middle East

D