How Do You Know When You’re Ready for International Expansion?

Taking your growth around the globe requires a dedicated strategy and a lot of hard work.

SPONSOREDUpdated 2:14PM • 07/12/16

There’s not a lot of significant cinematic achievement to celebrate in the 1999 film Entrapment, but there is plenty of action to follow. Wielding his alluring accent masterfully, Sean Connery plays an aging art and jewel thief in an unlikely pairing with a competing jewel thief, played by Catherine Zeta-Jones.

The plot is somewhat ludicrous: the pair meets in secret in hideouts like an abandoned Scottish castle, hatches plans to steal priceless valuables from exotic locales around the world like Kuala Lumpur, Malaysia, then make off with said goods in the end with little more than scratches to show for their troubles. And, of course, there are the now infamous scenes as Zeta-Jones ducks and dives under laser-based security systems, in, let’s say, rather form-fitting clothing.

It’s certainly not Citizen Kane.

But, there are parallels in it to the life of luxury many of us in franchising crave: jetting off to survey a growing worldwide network of successful locations, growing wealth and influence, cultivated through the coveted prize of international success.

Here’s the problem: international expansion is hard. Really hard. And, many brands who see it as an avenue to quick success end up pulling the trigger too early, or worse: misfiring altogether.

So, when is the right time to begin investigating whether an international expansion push is right for you?

“I always advise clients not to even think about international expansion as an option until their domestic operational processes and support are fully optimized,” said Sean Fitzgerald, chief development strategist for No Limit Agency*. “I don’t think you can accomplish that until you have decent scale. For most brands, that’s probably at least 100-200 locations. You need to be an experienced franchisor before you can replicate that system internationally.”

Which Wich Superior Sandwiches followed that road map, and is now reaping the benefits. While international expansion was always a coveted prize, the rapidly growing brand waited until 2013 to open its first international location, long after it had passed that 100+ domestic unit mark. Which Wich now boasts 24 international locations, concentrated in Latin America (Mexico, Guatemala and Panama) and the Middle East (Saudi Arabia, Qatar, Kuwait and Bahrain), and is on track to reach 35 open international locations by the end of 2016.

“There are many differences between domestic and international expansion, and a lot depends on which country or region is chosen for expansion as well as the level of global recognition the brand already has when first making the leap,” said Which Wich vice president of international operations and development Alex Oswiecinski. “Supply chain and marketing functions, which are typically centrally managed in the U.S., must be localized to the country. Exporting all products from America limits the local competitiveness of the brand due to cost. Each country has its own vendors and effective channels when it comes to reaching the consumer with marketing.”

Real estate and legal dynamics can also differ greatly from country to country, Oswiecinski advises. Because of that, brands that connect with well-established and locally connected international franchisees are set up for more rapid expansion success.

Failing to set that system up can keep the pump from priming, and instead cause bigger problems, agrees Fitzgerald.

“Brands that pull the trigger too soon can and do see their international plans blow up in their face. People come to you and write big checks and it’s hard to turn those down. But, when you sell a master franchise internationally, you’re essentially signing someone on as a partner franchisor and giving them the rights to your brand in a foreign place. Without controls in place, things can go haywire quickly. If your operational support isn’t fully optimized, it’s going to cause significant issues trying to teach someone how to essentially be a franchisor in a different location,” he said.

However, if your processes are optimized, the benefits to growing outside U.S. borders can be big.

“The most obvious advantages are the additional revenue streams and long-term diversification during downturns in the U.S. economic cycle. Many global brands get innovative ideas from their international franchisees as well, and test them in foreign markets. For instance, McDonalds’ Happy Meal was originated in Guatemala and their McCafe line started in Australia before spreading worldwide,” Oswiecinski said.

For Which Wich, the decision to expand internationally was not taken lightly, and a process was put in place very early on to accomplish a long-term goal.

“Our founder Jeff Sinelli had an original vision that Which Wich would go international in its 10th year of existence, which came true. The critical brand elements were designed from the start to have both global appeal and specifications that could be sourced outside the U.S. Once the Which Wich business model was proven successful in America, Jeff added staff with international expertise to the team to help take the brand global,” Oswiecinski said.

But, just because you’re a proven concept in the U.S. doesn’t prove you’re a proven franchisor, Fitzgerald cautions.

“There’s a lot of internal investment necessary in order to become international. You have to consider things like conversion to another language for your operations manuals, logistics for your supply chain, and ease of access,” Fitzgerald said.

For that reason, for many brands, Canada is the first route into an international expansion system. It’s mostly English speaking, an easy location to access from a logistics standpoint, and is easier to get to for support.

But, Fitzgerald again cautions that Canada, like all international expansion markets, is not a one-size-fits-all.

“Canada can be tougher for some concepts, because it is a different culture, and it may not embrace all franchise forms in the same was the U.S. market does. That’s why it’s so important to do your homework before deciding where to go and when,” Fitzgerald said.

“I would advise an emerging brand to make a short list of countries they’re willing to explore based on success of similar global brands in your space and general ease of entry,” agreed Oswiecinski. “Being the category pioneer is great for first-mover advantage, but it’s not for beginners. Also, get counsel from an experienced international franchise attorney to draft agreement templates and secure trademarks in target countries. Look at all aspects of your brand from product specifications to design elements and determine what must remain constant globally. In other words, what are your ‘non-negotiables?’ And finally, look for well-capitalized international partners that already have experience running other international brands, or at least similar local retail or service businesses in your target countries.”

Finally, don’t ignore common sense. Even if every other factor lines up from a financial and logistical sense, your concept still has to resonate with consumers.

“It’s a very basic, yet often overlooked factor,” said Oswiecinski. “You have to be aware of the general appeal of your main product when prioritizing markets. One of the first things we did at Which Wich was look at where people view bread and sandwiches as an everyday meal versus countries that have a different staple such as rice as the mainstay. That set us up for international success once we put the other pieces in place.”

*This brand is a paid partner of 1851 Franchise. For more information on paid partnerships please click here.

How Do You Know When You’re Ready for International Expansion?

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