Franchise Update Magazine Issue IV, 2016 | Page 56
GROWING YOUR SYSTEM
Growthstrategies
Going Abroad?
Be prepared to make some changes!
O
BY KAY AINSLEY
n one end of the spectrum of
international expansion is the
thought that you are offering
consumers in other countries the opportunity to partake in an American experience
and nothing will change from market to
market. On the other end is the thought
that you will make whatever changes are
needed to sell product. Somewhere in the
middle, successful international franchisors find that some changes may be necessary to meet local market demand—but
only if those changes do not significantly
change the concept, and only if the franchisor can provide the required support
and controls to protect the brand. Most
adaptations fall into one of three groups.
1) Absolutely required
Concepts based on a membership program
such as gyms and health clubs, children’s
edutainment and daycare, or in-home services often charge members’ credit cards
or debit their bank account each month.
This practice makes it convenient for their
members and increases customer retention here in the U.S., but these concepts
will need to find an alternative means of
collecting payment in countries where a
large segment of the population does not
use credit cards or even have a banking
relationship.
Food and beverage concepts that use
pork or pork products will need to find
alternative ingredients in countries where
eating pork is prohibited on religious
grounds. When a product is offensive
or prohibited on religious or cultural
grounds it is easy to understand why a
modification to the menu is required if
the concept is to be accepted by consumers in that market.
Names, logos, and advertising items
that do not convey the intended message
when they are translated into the local
language must be fixed before they are
used. Gerber learned a lesson when they
first started selling baby food in Africa
using the same packaging as they used
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in the U.S. Because of the low literacy
rate it was customary to have the picture
on the packaging reflect what was in the
package. A smiling baby, however adorable and recognizable in the U.S., did not
work in Africa.
Consumers have
come to expect
consistency from a
brand, and drastic
changes to the
brand promise can
cause confusion
at home and
internationally.
2) Required to compete
While not essential to conduct business,
there often are changes that will improve a franchisor’s ability to compete
in a foreign market and provide their
franchisees a higher chance of success.
These changes may also be necessary to
ensure the consistency of a brand’s core
products. For example, pizza makers will
find that the flour and water vary from
country to country and they may need to
adjust their recipe, cook times, or temperatures to achieve the same product
they are known for.
Adding or expanding the number of
chicken items on a menu or adding items
with a different flavor profile can increase
the appeal to local consumers. Substituting local ingredients and reducing portion
size are examples of changes that help
meet market demand and improve price
point requirements in food and beverage concepts.
3) Purely optional changes
Some changes are based more on the
preferences of the franchisee than on
market demand or economics. These
changes may include a preference for
a certain type of equipment, or adding
a product or style of product or service
the franchisee would like to offer, but
that preference is not backed up with
market research. Franchisors should
consider several factors before agreeing
to a change, among them:
• Impact on the brand and company culture. Consumers have come to expect
consistency from a brand, and drastic
changes to the brand promise can cause
confusion at home and internationally.
• Impact on neighboring markets. If the
change will also be necessary in other
markets it may be worth the investment.
• Cost to implement the change. There
may be external costs such as researching
and vetting new products or suppliers,
establishing a supply chain, creating and
registering a new trademark, or creating
a new advertising campaign. There is also
the internal cost of staff time for changing
operations manuals, modifying training
programs for the franchisee and for the
franchisor’s staff who are supporting the
change, IT programming, and accounting.
It is important to recognize that some
costs may be a one-time investment and
others may be ongoing.
• Impact on the economic model for the
franchisee. If the change results in higher
operating costs for the franchisee it may
negate any increase in revenue.
• Return on franchisor’s investment. The
potential of the market must be large
enough to justify the cost of developing
and implementing the change.
Conclusion
Not all markets are right for all concepts.
Franchisors are wise to work with their
prospects early in the sales process to
identify changes and determine how
they will be implemented and who will
bear the cost. Sorting out these issues
early on will help get the business off to
a good start and lay the foundation for
a long-term relationship. n
Kay Ainsley is managing director of MSA
Worldwide, a leader in franchise consulting that provides strategic and tactical
advice based on real world experience
to new and established franchisors. Contact her at [email protected]
or 770-794-0746.
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