Small Franchise Systems Can Go International Too
21 May 2018 - Just because a franchisor operates a small or emerging franchise network, it shouldn’t exclude them from exporting their franchise brand to other countries, providing they meet certain basic requirements. In fact, there are large franchisors that based upon their performance and product are unqualified for international expansion. In some cases, a small franchise system may find the market in the U.S. so competitive, it might be in their interest to consider expanding into foreign markets. There are certain attributes that qualify a franchisor for international expansion but size alone shouldn’t be the determining factor.
To gain some perspective on this subject, I spoke with Chef Anthony Russo, CEO of Russo's New York Pizzeria and Russo’s Coal Fired Italian Kitchen. Based in Houston, Texas Russo’s began franchising in 1998 and operates 30 franchise locations in Texas, Oklahoma, Arkansas, Tennessee, Florida and Hawaii.
I asked CEO Anthony Russo, how he came to take his franchise overseas. He explained that true New York style pizza wasn’t available in many U.S. markets and foreign countries. He told me how the two restaurant concepts have built their reputations on being undeniably authentic in every way. While still franchising in the United States, Anthony started his foray in other countries by engaging the services of a broker. After one year, without success from the broker, he decided to personally exhibit at a franchise show in the Middle East, where he presented his pizza. He received a great response and currently has seven franchise units in Dubai with two more under construction. He also signed a development agreement for 10 locations in Saudi Arabia. After his success in the Middle East, he decided to target Western Europe where he had already exhibited in France and Spain. Unlike other franchisors, he uses a development agreement franchise model in each country rather than a Master Franchise agreement. He feels this approach is less costly for the franchisee and he doesn’t risk giving up franchise rights to an entire country. As Anthony works on international expansion, he continues to franchise in the U.S.
I asked Anthony Russo what he considers the most important requirements for a smaller franchise to go International. His response: “Minimum 20 locations, a good system, strong corporate staff and sufficient working capital.”
Regardless of size, the following are important qualifying factors for international expansion:
Suitable financial resources for an international project.
The franchise has a successful operation in the U.S.
Strong potential for expansion in other countries.
Franchisor staff is available and capable of training, servicing and supporting a franchisee in another country.
Franchisor leadership is engaged and committed to international expansion.
The franchisor can provide the operational and marketing knowhow
Operations and marketing manuals are current and up to date and marketing materials that can be adapted and translated for use in other countries.
The franchisor acquires or has familiarity with target countries.
When a franchisor considers taking their franchise concept to other countries, an important factor to consider is whether their franchise is qualified to expand to other countries. One factor, that should not disqualify a franchisor, is its’ size. This doesn’t mean that any franchisor regardless of system size is qualified to go overseas, but rather that smaller franchisors shouldn’t rule out going international simply because of their size.