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International Franchise Opportunities for Sale

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Current Trends and Research in International Franchising
As globalisation plays an increasingly prominent role in the world economy, businesses are prudently seeking to expand their operations abroad. The rise of giant franchisors, such as McDonalds in China, are sending an urgent signal to large franchise behemoths and newly established franchises alike that international franchising is here to stay.

Franchise brands have “remained bullish on international expansion,” despite the different challenges they face, including a slowing global market and a lack of knowledge about franchising (Prewitt 2008). This is especially true outside of the United States, where “the franchising market is not as well understood in some markets” (Gunter 2008). The franchisor’s obligations, such as providing training and sticking to the stipulations in the franchise agreement, are not as clearly delineated in international franchising; however, the franchise structure common in the United States is beginning to gain ground in international locales, where the evironment remains favorable for starting a new business.

Companies that otherwise had not considered going abroad are finding themselves conducting international research and tweaking their strategic plans to include expansion into new foreign markets. In fact, “business is flourishing in many other regions of the world as personal income and domestic production skyrockets” (Knack 2008). Rapid growth is taking place in regions such as Latin America, Asia (especially China), the Middle East (especially Saudi Arabia) and Europe. Since franchise regulations tend to be lax in areas of Europe, namely the UK, many franchise opportunities that loosely follow the franchise structure have cropped up.

When a franchise decides to expand into a different country, it is imperative that the franchisor take all aspects into consideration, including the economic, political and social climate of the area they are targeting. Important considerations include the economic health of the region, whether or not resources and capital are available to the target group of qualified potential franchisees, the possibility of supply-chain issues such as ready availability of fuel or other necessities required to run the franchise and assessments of the political climate of the region. The future of this region, including the possibility of political instability or a rise in regulations that hamper franchise growth, must be taken into account as well.

For example, Mexico’s pro-business, pro-American government is giving franchising a boost, and in Central America, “franchise-friendly cultures are growing at a record pace with a large number of successful stories,” including Yum! Brands like KFC (Le Sante 2007).

However, there are other important factors, also called market attractiveness factors, that draw franchisors to certain markets, such as the types of franchise regulations in place in the region and the structure of the target market. When a franchisor engages in market selection, they will heavily evaluate the market potential and legal environment (Doherty 2008). Once the franchisor selects their market, they will begin recruiting franchisees to help run the expanded operations.

Interactions between the franchisor and franchisee are particularly important, and in choosing a franchisee, the franchisor must consider how their partner will fit into the overall strategy of the organization, how that particular country’s market will perform and whether or not the franchisee is qualified to become a franchise partner (Altinay 2006). Franchisors tend to choose franchisees that understand the brand, have specific expertise and business acumen and have extensive knowledge of the local market (Doherty 2008). Franchisees are drawn to franchisors that are aware of the local environment and status of the market, and are willing and able to communicate openly with the franchisee. Besides these tangible criteria, the franchise partners must have chemistry in order to successfully form their partnership.

An example of an organisation that has implemented these market and partner selection techniques is Holiday Inn, whose “global ambitions” have led to localised, customised hotel franchises all over the world, in Europe, the Middle East and Africa. Although it remains to be seen how successful Holiday Inn’s expansion efforts will be, their willingness to cater to the local market in their international expansion efforts should serve them well (Scoviak 2007).

List of Sources
  • Altinay, Levent. “Selecting partners in an International Franchise Organisation”. 2006. International Journal of Hospitality Management
  • Doherty, Anne Marie. “Market and partner selection processes in international retail franchising”. 2008.  Journal of Business Research. 
  • Goldman, Stuart. “A Different World – Planet Fitness”. September 2007.
  • Gunter, Heather. “Franchising structure gains traction outside the U.S.”. 2008.
  • Jones, Robert. “Franchising in Panama and Central America”. March 2007. Franchising World.
  • Knack, Gaylen. “Strategies for International Development in Uncertain Times”. November 2008. Franchising World.
  • Le Sante, William. “The Future of Latin America”. March 2007. Franchising World.
  • Scoviak, M. “Holiday Inn’s Global Ambitions”. June 2007.
  • Prewitt, Milford. “Brands bullish on global growth”. 2008. 
  • Xiao, Qu; O’Neill, John W.; Wang, Huiyang. “International Hotel Development: A study of potential franchises in China”. 2008. International Journal of Hotel Management.

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