First in Country Franchise—Strategies to Get There
A company must have an established international presence and build on that strength before being able to capitalize on a “first in market” opportunity.
When it comes to “first in country” opportunities, there are few markets that remain in the world of international foodservice franchising. The markets that are available tend to be higher risk, seemingly making them less attractive. This is not necessarily the case, for the right brands in the right position that higher risk might be worth taking.
Being the first U.S. foodservice brand creates a lasting impression and position in consumers’ minds. It also tells a great story and creates strong buzz for your brand, like the recent Cinnabon opening in Libya. If a market already has an American franchise, it can still create a strong consumer advantage and newsworthiness by being the first U.S. brand in your particular category, which will give your franchise a huge competitive advantage if properly leveraged over time.
Before considering a move that would make your brand a pioneer in a market, it’s important to make sure it fits with your overall brand strategy. Key factors to consider are:
- Is there already consumer awareness of the brand in the target market?
- Does the market fit with concentric/contiguous growth model?
- Are the proper supply chain solutions (and expertise) available?
- Is there a long-term commitment to this market by both the franchisor and franchise partner?
Most importantly, a brand’s first international market should not be a pioneer market. With the greater complexity and risk in virgin markets, a company must have an established international presence and build on that strength before being able to capitalize on a “first in market” opportunity.
Of course, there are also external challenges that must be overcome. It’s important to understand the risks and make sure the franchise brand is approaching the market with a solid knowledge of the country. Perhaps most important is to ensure your business can receive payment for royalties and fees. Find out if there are currency controls. Some countries have limited or non-existent franchise law or limited intellectual properties protection. Make sure your company is comfortable with the country’s business law. Is it easily interpreted and understood? Can your business expect to be reasonably represented in court, if required? A thorough market assessment of these factors and others should be part of your due diligence. Additional actions that should be taken are:
- Complete in depth market assessment
- Industry scan/study
- Consumer research
- Supply chain study
Select the Right Partner
Once your franchise company decides to move on a virgin market, the selection of a franchise partner is the most important and critical decision it will make. The discipline and rigor employed in this process must be equal to or greater than your standard practice in your home market. The key considerations your business will assess include the following:
- Rigorous in-depth general background review of all candidates.
- Evaluate fit with brand and brand team.
- Must have strong capabilities in supply chain, real estate and food related business such as hotels or catering.
- Bi-cultural link.
The standards delivered by most global brands exceed local competitors, further enhancing the consumer experience.
Typically the country’s economic and political stability add to the risk involved with entering a new market. Markets that provide a “first in market” opportunity often lack modern supply chain, general construction standards, mechanical and engineering capabilities and so forth. There may be a limited amount of talent in the labor pool, in particular management, which could result in unsuccessful operations. Therefore, a disciplined and cautious approach is needed.
Prepare to Communicate
After assessing the risks, there are key steps to take to ensure a successful franchise operation. As with any market launch, having the right disciplines engaged, skill sets deployed and experienced brand veterans involved are essential. There should be a willingness to invest in the pioneer stage of development and forego quick returns by both the franchisor and franchise partner. The franchisor should commit to extensive operating support for the initial nine to 12 months. For the initial training, the franchisor’s training team may want to include resources that allow for extended training that compensates for the inexperienced labor pool.
Both the marketing and PR teams should have strong depth in the market to support the brand before and during the market launch or your brand risks losing the advantage it seeks to gain with consumers. Remember your company is not only introducing a new brand, it is promoting a new concept. The standards delivered by most global brands exceed local competitors, further enhancing the consumer experience. Communicating this differentiation is challenging, but necessary. The launch plan should tap into all the various channels of communication that are appropriate for the brand and category your franchise is launching in.
Supply Chain: Backbone to Success
Supply chain is the backbone of any business and the most critical area to be considered in a pioneer market. Your brand must make certain it can maintain standards and afford to sell its product in the target market. Often the range of locally available ingredients, cold chain supply and general logistics are lacking in “first in country” markets. Many virgin markets are price sensitive and extensive time will be needed to establish a supply. Hitting price points in price sensitive markets can only be done by buying locally. Cost can be of less concern if the target market has a lower tariff structure, but that does not guarantee permissive import regulations so other factors such as ingredient restrictions must be carefully considered.
It’s important to note that international expansion–and pioneer markets in particular–is not for everyone. If you’re not an established, international brand, your business will likely struggle. Knowing the realities and understanding the risks of each market and the strengths of your brand team and franchise partner will better prepare your franchise business for what lies ahead.
When successful, there is a sense of accomplishment and halo effect that the brand enjoys, in addition to the competitive advantage, if maintained. ⎯
Mike Shattuck, CFE, is president of FOCUS Brands International, which includes Carvel, Auntie Anne’s Pretzels, Cinnabon, Schlotzsky’s, Moe’s Southwest Grill, and the franchisor of Seattle’s Best Coffee, and totals more than 3,300 locations. He can be reached at 404-257-7053 or email@example.com.