Master Your Future as a Brand Builder
It is through franchising that some of the world's largest and best-known brands have achieved international expansion. The business model has enabled these companies to adapt swiftly to cultural and economic differences, capitalising on the local knowledge and contacts of their international franchisees to build the brand in new markets. While the franchisor has achieved expansion faster and for a lower investment, the franchisees have become business owners and brand developers.
There are three main international franchise expansion routes: A National Master Franchisee typically acquires the rights to an entire country with a view to establishing a pilot operation and then sub-franchising to single/multi-unit franchisees. Alternatively, a franchisor may choose to appoint a number of Regional Master Franchisees who also have the ability to sub-franchise. The third route is through Area Developers, who can sometimes acquire the rights to establish a limited number of sub-franchises.
Deciding what kind of licence you wish to invest in will depend largely upon the capital you have available, your past experiences, skills set, and your ambitions. While specific experience is not generally essential, a proven business track record usually is. Ray Hays, Comfort Keepers' Director of International Franchising, outlines the requirements the American brand looks for in its Master Franchisees: 'Fundamentally, we search for partners with the ability to build a business on a national scale.
'They must have a business track record, but not necessarily in our line of work, a solid management team, some industry contacts, and be prepared to 'roll up their sleeves'.'
Some franchisors place the candidate's mindset above capital available, but bear in mind that if you have insufficient funds this will greatly increase your chances of failure. 'We wouldn't be doing anyone a favour by taking on franchisees without sufficient funds,' Hays agrees. 'One of the main reasons for failure in franchising and in business in general is lack of working capital. However, if we discover an ideal candidate without sufficient funds, it is possible for them to source a business partner.'
Becoming a Master Franchisee involves taking a brand and adapting the existing business to suit a new market. This does not involve reinventing the wheel, but making subtle adjustments to suit cultural trends, the economy etc. Irish brand Zumo recognises the importance of 'tweaking' its juice and smoothie bar concept to suit new markets. Michael McDermottroe, Director of Franchise Development, says the key to international development is to never assume that all countries are the same. 'Every market must be treated individually, you have to be flexible and understand that market. The Master Franchisee is central to this, as they have the ability to tweak the system to suit the market.'
Non-medical senior homecare franchise Comfort Keepers believes Ireland is ideally suited to Master Franchising. 'Ireland is an excellent market in which to establish an early European presence and this is not unique to franchising,' says Hays. 'It is a relatively easy market, English speaking with commonalities to the US in its approach to business. However, you must not treat it as an extension of the US, it is a unique market in its own right. It is also a good proving ground for American franchise brands.'
As technology has grown more sophisticated and the global market has become smaller, providing training and support to Master Franchisees around the world has become easier. As Master Franchisee you can expect to work on your own initiative, but like single unit/ multi unit franchisees you should receive training and support as part of the franchise package. Bob Power, Comfort Keepers Master Franchisee for Ireland, relates: 'The world is becoming smaller and communication easier with email, the Internet and telecommunications. Allied with the availability of flights to the US and the infrastructure of the franchise, Comfort Keepers are there to support each Master Franchisee, which is a huge benefit.' Zumo form a very close working relationship with its Master Franchisees visiting them frequently throughout the duration of the franchise agreement.
It is common for companies as well as individuals to become Master Franchisees, as in the case of Comfort Keepers Ireland. Elder Healthcare Group saw a niche market for providing non-medical care to the elderly in their homes and decided that they wanted to be the first to market. 'We wanted to buy into the experience of an existing business as Master Franchisee,' Power clarifies. 'By investing in Comfort Keepers we can roll out the business quickly and benefit from their knowledge and experience. In addition, the US is ahead of Ireland in terms of provision for the elderly at home and we can see how the market could potentially develop.'
Researching the franchise before making an investment is critical. Hays points to three main research areas: 'Due diligence on the franchise concept, company and the benefits the franchise model presents, track record and the management; a careful evaluation of market demand; an evaluation of the financial metrics that will point to whether it will provide a good return on investment.' Franchise Development Services Director Roy Seaman affirms: 'It is essential that you thoroughly research an opportunity before making a commitment and we strongly suggest you seek the advice of professional franchise advisers such as the banks, franchise lawyers and consultants. You should also make sure that the franchisor is a member of a franchise association, such as the British Franchise Association or the Irish Franchise Association, as this will mean they have chosen to be vetted against a code of business practice.'
Some International Franchising Terms Explained
Single Unit & Multiple Unit franchisee Typically requiring a low value investment, these will usually be acquired through a Master Franchisee already established in the country. If a Master is not in place, it is rare for a franchisor to sign such agreements, as this brings the direct responsibility of providing training and support backup onto the franchisor, who may lack the local market knowledge required. There are exceptions, especially for single units located in internationalised locations such as major airports, and this process is known as direct franchising.
Regional Master franchisee A fast growing method of international franchising. A country will be divided into regions, for example Ireland could be divided into two regional territories, where the Regional Master Franchisees sub-franchise.
National Master Franchisee In this case, the Master Franchisee takes control of the entire country and operates a policy of sub-franchising, although some corporate expansion may also take place, especially in establishing a pilot operation.
Regional Corporate Area Developer Again dividing a country into regional licenses, but with no ability to sub-franchise. Development of the territory is carried out entirely through the corporate investment of the Regional Corporate Area Developer.
National/Multi-National Corporate Area Developer This arrangement is reserved for large corporate entities with the investment capital to fully exploit the market(s). There is usually an agreement with the franchisor to open 'x' number of outlets in 'y' years in order to maintain the exclusivity of the agreement.