
Leveraging IP Assets to Enter Foreign Markets Transaction franchise company example
International Expansion • franchising is an international activity • more than 400 U.S. franchise companies • operating in foreign markets • adds revenue sources and grows markets • KFC - U.S. vs. China • reduces dependence on home market • leverages existing IP, know-how, technology • no longer exclusively an American export • 2 key issues (below)
When to Enter Foreign Markets (1st Issue) • sufficient maturity of franchise system • U.S. franchisor had 137 domestic outlets • tweak the business model (below) • selecting foreign business partners • selecting the right target countries • TSS Photography - South Africa (late ‘80’s) • McCafe - tested in U.S. 2001: 33 countries • the market leader in Germany (306 coffee shops) • transfer of PBS to foreign partners • #1 trigger – inquiry from a foreign market
Tweaking The Business Model for Foreign Markets (2nd ) • modifying domestic expansion strategy • master franchising paradigm • removes burden of foreign market operations • and selecting the right foreign franchisees • master franchising risks (McDonalds) • one-time fee: $100,000 - $1,000,000 or more • master & franchisor split FF’s and royalties • master becomes a clone of the franchisor
Tweaking The Business Model for Foreign Markets (Cont’d ) • tweaking dual distribution strategies • tweaking the level of control • tweaking the training program • tweaking operations manuals • tweaking sources of supply, etc • developing the legal documents • strategies to reduce master franchising risk: increase up front fees lower ongoing royalty fees • > 2,000 master franchisees worldwide
Preliminary Research & Steps • research business, cultural and political • research cost & ease of doing business • research competitors in each target country • research the market in each target country • protect the IP (mark) in target countries • develop a profile of the master franchisee • research legal compliance in target countries • provide support, know-how & services?
International Marketing Steps • add a page to existing Web site • process master franchisee leads • network with international systems (IFA) • attend international franchise shows (SG) • advertise in international publications • hold candidates to a structured process • Discovery Day
4,000 Best Western hotels in 80 countries • 2,000 North America • 2001: 6 hotels in Asia • 2007: 106 in Asia - 17 more in China, Japan, Indonesia, Thailand • 2010: 200 (projected) in Asia
Howards Chronology • 1977: first retail store in Australia • 1998: began franchising in Australia • 2004: chain of 35 outlets • master franchised West & So. Australia • used the master model for international • 2004: 1st master franchise in Singapore - master must own & operate a Howards store - master subfranchises; all training in Australia - Howards revenue: MFF + royalty (% split) • 2005: 2nd in New Zealand
Howards (continued) • 2005: 3rd in Spain • 2005: 4th in the Middle East • 2007: 5th in Ireland • 2007: 6th in the Philippines • Howards International: 14 stores about 20% of sales • changes to business model = 10% - supply logistics • now 62 stores open in Australia