Executing the Proper Market Development Plan to Ensure Brand Standards
Franchising World, November 2013
BY RYAN PATEL
Having the best operations in the retail, quickservice restaurant and casual-dining segments do not automatically result in success. The other half of this equation is the real estate strategy and its execution. We have all seen a variety of concepts fail. Many of these breakdowns are due to not having a comprehensive market plan to execute, and in other cases, from just picking the wrong location. Mistakes outside of the domestic market are even more costly as they can force the brand to close its entire operations in a country.
Understanding the risks is the first step as global expansion often appears to some as a blank canvas with an unlimited amount of opportunities to add colors. To others it is a natural progression for brands looking to grow. For many looking from the outside in, global expansion and entering new markets seem to be a “no brainer.” One can only wish it was that easy. The world is a large place with important variances from country to country, city to city, with its real estate looking different from all types of aspects. That is why I like to share some of the key principles to market development in global expansion.
Every market is different and acknowledging that is a critical step. In some U.S. markets, a few attributes like dedicated parking and being directly next to the right quality tenants can make or break a store. In different countries, this is not necessarily always true. One may usually see a row of retail or food tenants on a single street, one store right next to other. But that might not always be true. For example, some countries in Southeast Asia have a row of retail/food/tailoring/wholesale establishments, one right after the other on the same street. In this case, there is not much relevancy on how people either view the brand or change their traffic patterns. As for parking, in dense and affluent populations, like in some Latin American cities, there is a drop-off zone for drivers to unload and pick up passengers, especially at malls.
Global expansion includes complexities that call for principles that companies can use to better ensure that a proper market development plan is in place.
Principle 1: Shared Values
The first component is to identify a partner on the ground with like-minded values and local intelligence, regardless of corporate or franchise structure. You have to share and believe in the same philosophy in building the market without compromising on the values of the brand. It may take more time, but there is great reward in finding partners who understand your company approach and work with you to build the market the right way. There is always a level of interpretation and creativity that is needed when entering new markets and cultures. The right partner choice creates thoughtful dialogue to guide in the best decisions for the brand and the market. In short, choosing the right partner is an act of protecting your brand’s experience and value.
Principle 2: Guardrails and Planning
Building and implementing strong brand guardrails help provide a strong foundation so things that are critically important are not compromised. The key point is to define both flexible and non-negotiable standards to make executional decisions clear and easy, no matter where you are - from leases to square footage, and from signage to frontages. In addition, the market plan identifies all potential trade areas with short- and long-term implications. Creating a plan and the buy-in from your team will help focus on building in the right areas and planning the right location sequence so you are not wasting time.
Within the planning stage, the availability of different store concepts for the team to use within a country can enable speed as well. A portfolio of different build-outs allows flexibility and creativity, such as kiosks (indoor and outdoor), endcap (corner space of the building), inline (space in between the corner locations of the building) and freestanding. These options help penetrate into a wide range of areas and possibly assist in getting into the toughest areas to find spaces.
Principle 3: Get Into the Details
It is not always apparent to see some of the intricacies of an area or site even after driving through the trade areas or spending a day there. Identify “local patterns” by seeing what local people do and how they interact in that area to see it through their lenses. Obviously, major factors most people look at are traffic and shopping or dining patterns in the market. Be sure to differentiate between local versus tourist behaviors. Identify the local purchasing habits and where people go for their daily needs from fashion retail, quick-service to fine-dining restaurants and even to the occasional purchases to local events.
Learn from the international brands that enter and engage with the local and regional brands to define the requirements for local relevance. Determine comparable sales, not just for brands in your categories, but for other types of brands that share the same consumer base in all the potential trade areas. You might be surprised to see how your hypothesis in certain areas will sometimes not line up with the numbers and can give you some insight into those areas.
Another factor is to understand a building’s location and its history. The “local negativity” associated with certain areas, and even more specifically to certain buildings, can result in a huge issue no matter the best real estate or brand. Multiple closures of different types of tenants over time in the same building in the same retail location create a mental barrier to consumers.
In Panama, I have seen a location where one space has been the site for five different types of restaurants and it is still unsuccessful; a large part of this was “local negativity.” Except for this one location, the trade area is filled with other food and retail establishments on the same street that are thriving.
If you can create some principles for your team and set expectations in executing them in a certain manner, you will have a better chance to maintain brand standards. As you set this up, the more information and facts you have at your disposal, the better the discussion and decision-making can be. This not only will help build an effective development plan, but engage the entire team to work toward the same goal.
Ryan Patel is director of global real estate & business development for Pinkberry, a business dedicated to being the most innovative yogurt retailer with more than 240 stores in 19 countries. Find him at fransocial. franchise.org via the directory.