Eight Questions To Consider Before Taking Your Business Global
26 Feb 2019 - Expanding your franchise internationally can be as big a task as launching a whole new business. How prepared are you?
What drives people to become entrepreneurs? For some, the draw may be having ownership over one’s job and situation. Being able to be their own boss is appealing to others, while many feel the satisfaction of running a successful operation from the ground up is the best reward. Increasingly, aspiring entrepreneurs have found that franchising offers the freedom they want with the security of a recognizable brand-name and corporate support system. For someone with an already established brand, perhaps in the UAE, leveraging your business’ name and success could allow you to expand globally through an international franchise network.
If you’re thinking of taking your business internationally through franchising, here are a few things you need to consider first.
1. What are the laws of the countries you wish to expand to?
If you want to enter a new market you should understand the conditions, investigate whether or not a country has a business friendly climate. While the UAE ranks consistently high for ease of doing business -11th in the latest report by the World Bank- it is essential to evaluate each of your target countries. The three main areas you should consider are the level of business taxes, the ease of registering property, and the ease of obtaining construction permits. These can all affect your ability to expand your business, through franchising and otherwise, and are important to research thoroughly.
2. Is there a language barrier?
If you are looking to expand throughout the Middle East, the issue of a language barrier, with Arabic in common among many countries, may not arise. However, if you are targeting expatriate communities or tourists, you may consider conducting business in English, ensuring your franchisees can speak it too. Furthermore, if you’re seeking to expand out of the Middle East, depending on where you see your business expanding and how quickly, it may be wise to have representatives who speak the languages of the target countries so assist your franchisees.
3. Is your franchise suitable for that country?
Not all businesses can be scalable internationally. For example, some products may be culturally specific and not translate well to a global market. Coffee franchises are one instance where entrepreneurs have seen enormous success because their products have broad appeal. Before you consider embarking on the franchise model, ask yourself if your business is too niche to appeal outside of your home country. If it is, see what you could change to make it more universal, while still keeping an identity of its own.
4. Is the finance available?
When it comes to finances, this must be considered from both the side of the franchisor and franchisee. Some brands charge large amounts for interested people to join their franchise. These franchise costs include administrative charges and often costs to secure premises to rent or buy. If you do not have the finance to outright buy premises in each location you wish to establish a presence, renting may be the option. Depending on the general economic conditions, a five-figure or higher franchise cost may not be achievable for your target franchisors. Many banks offer franchise finance- this may be something to look into if needed.
5. Do you have a good management team?
Before international expansion can be considered, things must be good on the home front. How is your domestic management team? If they are efficient, great at their jobs, and have the organizational skills you expect, then there is no issue. If you feel some things are lacking, or you’re a small team, it may be time for some upskilling or team expansion before you spread your business abroad.
6. What are the economic conditions?
In addition to considering a country’s ease of doing business, the broader economic conditions are a major concern to any would-be international franchisor. I mentioned corporate tax rates earlier, but rates of personal taxation are also something to consider. In addition to wages, taxes determine how much disposable income people have. It would not be the best idea to set up a luxury clothing store franchise in a country with low wages, for example. Factors that may affect the purchasing power of the local population are important to bear in mind. You don’t have to be a luxury boutique to be judged as non-essential if wages are low. Somewhere with consistent wage growth, low taxation, and a healthy tourism sector could be more suited to your business and your goals.
7. How quickly - or slowly - do you want to expand?
The franchise model is best suited for rapid expansion. By passing some of the costs and administrative burden onto franchisees, franchisors can watch their businesses grow faster without the same level of investment. However, if you are in no rush to expand your business internationally, franchising may not the best option for you at this stage.
8. Are there suitable places for a franchise?
Even if you have now narrowed down which country you want to target for international expansion, and even which city, location is still a factor. Which area of town should your franchise be based in? Are there any suitable and available plots for your franchise? Look into up and coming developments such as shopping malls and enterprise zones in your target cities as potentially suitable spots for your brand’s next location. As an already experienced entrepreneur, you will know that in order to get enough footfall and target the right price bracket, location is key. Whether you want to take your franchise business throughout the Middle East or beyond, I hope these key questions will help you to decide your next steps.
Online Business Editor, Aceville Publications