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Does Your Franchise Need an International Partner?
May 2007 Franchising World
Having a third party that understands franchising to nurse both parties through the process can be invaluable. The first point to make in the search for master franchisees is that finding an overseas partner is not where the international franchising process starts. In the unlikely event that a business is considering international development because “everyone else is doing it, and it seems like a good idea,” first conduct some serious research to ensure the franchise company management is aware of what it’s getting into. It is assumed that any company wanting to franchise its system into other countries has applied appropriate professional advice into how to structure its international franchise package, how to build its international support infrastructure, how to decide which countries should be its prime targets and how to build the profile of the individual or organization that would make an ideal partner in each market. If the steps above are completed, the next step to consider is how does a system generate and process inquiries from suitably-qualified candidates? The most appropriate way to do this is to explain how it’s done within this business. It will be a much easier and much more successful process if companies engage a network of professionals who know their local markets, than it will if a franchise system tries to do it alone.
Seeking New Markets Once the franchise system and its partner are confident that a marketable package has been produced, a marketing plan and budget to promote the opportunity are devised. All inquiries are directed through the partner, chiefly because candidates initially prefer to be dealing with people in their own country and an agreed-screening process commences.
Let the Marketing Begin The inexperienced will say the answer to where to promote is obvious. Place plenty of advertising in traditional franchising media and Web sites and attend the relevant franchise exhibitions. While these avenues may indeed be part of the marketing mix for a particular system, experience suggests they should not be the sole avenue, nor are they likely even to be the best sources of inquiries and the question arises: Is this where local knowledge of the market comes into play? Many potential master franchisees do not know they are potential master franchisees. Existing franchise companies may not realize they could take on another system. Experienced business-people, or existing corporations, may not realize they could grow their businesses by developing someone else’s successful concept. All these potentially-exciting candidates will not be reading the franchising press, nor will they be attending franchise shows, so they will not see the opportunities promoted there. Potential master franchisees need to be reached some other way. One of the ways this is done in the United Kingdom is to provide generic articles for the general business and investor media, and make presentations to investor groups and individuals who are outside the franchising community that extol the virtues of becoming a master franchisee. Another tactic is to run generic advertising in the national business media, sometimes supported by specific advertising for a specific client. The outcome of these activities is to build a database of known investors, together with details of their business experience, the sectors in which they are interested, and the amount of money they have available. Members of this database become prime targets for appropriate incoming systems and can be directly approached when a suitable opportunity becomes available. A recent development of the database system has been to invite pre-qualified, potential investors to “Master Franchising in the 21st Century” events, which happens twice a year, in London and Dublin. With the support of various law firms and banks, the sessions start with some general educational sessions about master franchising in general, but these are followed by presentations of up to six non-competing systems, typically from the United States or Australia, who are actively seeking master franchisees in the United Kingdom. These presentations are ideally done by a senior executive from each of the systems, not only because they can answer all the questions, but because they can demonstrate true passion for their opportunity. Meeting rooms are made available for post-seminar meetings should individuals want to know more from a particular franchise company at that time.
The Recruiting Process Whatever the source of an inquiry, it is more likely to move through the recruitment process if it is professionally followed up and there is a clear process of stages through which it must pass. This can start with simple telephone screening to decide whether there is a potential match, based on the profiling criteria established before the recruitment project starts, through dispatching marketing materials, following up with further telephone or personal meetings, establishing that appropriate finance and experience exists, all leading up to the all-important Discovery Day at the franchise company’s office in their home country. By the time the candidate gets to this stage, he will need to be firmly certain about the opportunity because it is obviously a serious commitment to make such a trip. Similarly the franchise organization will need to be confident that the candidate will devote the required amount of time and personal resources to the visit. It would be difficult to achieve such commitment without the involvement of a mutually-trusted third party. After the Discovery Day, when the candidate returns to his home country, the local consultant can help to keep the impetus going by obtaining feedback from, and providing it to, both parties as to how things went and what outstanding issues need to be resolved. Assistance with development of the roll-out plan and obtaining working capital finance from local banks is an added benefit at this stage, as is access to qualified legal support to deal with negotiation of the agreement. A franchise system can do all or most of the above steps themselves if it has enough experienced staff and ample resources, but this is rarely the case and the added complication of time zone differences makes it worse. Having a third party that understands franchising to nurse both parties through the process can be invaluable. One final advantage to be considered, certainly for any business planning to find a successful master franchisee in the United Kingdom, is the availability of ongoing support for the master, particularly at times when it is impractical for the franchise company to make as many country visits, or even provide as much telephone support, as it would like. Until such time as a system’s international franchising operation can afford its own in-house team of experienced operators, it might make good sense to outsource the whole lead generation, inquiry processing and subsequent support services to others. Brian Duckett is managing director of Howarth Franchising, a U.K.-based franchise consulting firm. He can be contacted at brian@howarthfranchising.com.
Those U.S. businesses that are looking for a master franchisee in the United Kingdom and Ireland (and often then onwards into the rest of Europe) are either referred by advisors in their home country, or contact a franchise consultant directly. In either case, details are requested about the package and plan, as outlined above, and some information about what research they have carried out into the market for their product or service in the target market. All that information is reviewed, and then feedback comment is provided as to whether any of the documentation needs to be improved or adapted to fit better with the requirements of the destination market. Should the franchise company need any help with “closing the gaps,” they will be advised how that can best be achieved.
So where will the marketing be placed? The answer to that, of course, varies from system to system and depends heavily on the profile of the candidate being sought. Sometimes the target could be any individual with sufficient money and business experience. Sometimes that target will need to be an existing corporation with a synergistic operation, particularly for an add-on opportunity. Other times the target will be an existing franchise company or master franchisee, which is looking to add another system to its stable. On occasion, it could be any or all of the above.
Sometimes, through the executive recruitment service which is a separate part of Howarth, serious investors with an ambitious franchise development manager have been partnered to create a “dream team” to develop the new master franchise operation. A good franchise system will assure that the chosen partner has as many of the necessary resources for success as possible.
