Franchise Systems Reveal International Expansion Desires
December 2008 Franchising World
IFA survey gleans in-depth insights of member-company growth interests.
By Carlos Poza
What better way to gain an edge on the competition than find out what your competitors are up to? Regarding brand expansion outside the United States, the plans of franchise systems can vary according to age, size and market opportunities. Yet, the results of a recent International Franchise Associationmember survey have clarified the activity and helped the association moreintensely focus future priorities on delivering member value.
Designed and distributed by IFA’s International Committee, the survey was sent to nearly 1,600 franchise systems in late spring, generating a nearly 20-percent response rate. The key finding revealed that nearly two-thirds (61 percent) of respondents currently franchise or operate in non-U.S. markets and three-fourths (74 percent) plan to begin international expansion efforts or accelerate their current ventures immediately.
When asked where they conducted business, franchisors frequently listed Canada, Mexico, the United Kingdom, Australia, Brazil, Singapore, Malaysia, India, Spain, Italy, Kuwait, Russia, France, the United Arab Emirates, Ireland, Chile, Egypt, Argentina and China. The regions most often explored were the Middle East, Western Europe, Central and South America and Eastern Europe. Of those respondents conducting business overseas, 16 percent reported generating between 25 percent and 50 percent of their revenues from international activity.
What the survey primarily aimed to determine, other than the current activities of IFA-member franchise systems, were member preferences and priorities; interest and demand levels for IFA international services and information; whether expressed preferences and priorities can be addressed with present resource levels; and future priorities for delivering member value.
The survey did determine which factors motivated international expansion plans and which resources were being used to carry out those plans. Whether it was competition, available funding sources, strategic benefits, client requests or diversification, the reasons why companies decided to go international varied. The factors that further contributed to going global included: profit opportunity (16 percent); good market (15 percent); brand-building (14 percent); and receiving an international inquiry (13 percent). More than onethird reported “all of the above” as a motivator.
Respondents also reported other items that assisted with international expansion efforts including Internet activity, seminars and training, brokers and consultants, referrals, matchmaking services, market research, direct mail campaigns and brand recognition.
Access to IFA and U.S. Commercial Service Resources
In addition to its domestic activity, IFA works toward furthering the international efforts of franchising through the work of its International Affairs Office. The U.S. Commercial Service, as part of the U.S. government, is also a partner in assisting U.S.-based franchise systems to enter foreign markets. The mission of the Commercial Service is to serve all United States interests that are conducting or pursuing business overseas. There is a general Memorandum of Understanding between the two entities to support each other’s programs and activities.
The IFA supports the mission of the Commercial Service by informing association members of its services and capabilities. While survey results determined that only 38 percent of respondents were familiar with CS programs, more than half were interested in learning more about the agency’s offerings. Many franchisors were not aware that through the CS, they can have access to “Gold” and “Platinum Key” services, trade missions, U.S. pavilions at overseas events, market research, background checks, partner searches and guidance from CS personnel about compliance issues and export licensing.
More than half, however, were more in tune with the association’s resources, which included the IFA convention and other seminars (56 percent), online research and support tools (19 percent), IFA-sponsored trade missions (10 percent), the International Member Forum (8 percent) and the International Affairs Office (7 percent).
Other services that respondents desired to aid in their expansion plans included international legal advice, translation services, updated country information, lead generation, targeted events, best practices sharing and incountry contacts.
Providing Member Value
Based on the results of the survey, IFA’s International Committee can focus on providing access for the membership to the appropriate resources to facilitate their international endeavors. The results also enable the rest of IFA’s membership to gauge how their growth plans compare to those of their peers and competitors.
When IFA members request information about a foreign market, the International Affairs Office can connect them with relevant market research via a CS Web site, www.export.gov . Because the CS provides sector and countryspecific market research, IFA is able to counsel and support the requests of its members without having to incur the costs and time of data gathering. Then, when there is research, the IFA can refer the members to the data, if available, and to a trade specialist conducting the research so that the members have another contact in their in-country network. From that point on, the members can prepare proposals using the research and can take advantage of the local support for items such as appointments and logistics.
The relationship between the CS and the IFA normally softens the more frequent issues with bureaucratic organizations. It is the objective of the IFA International Affairs Office to provide all members with useful and reliable information on conducting business around the world. In addition to providing access to external resources, the department will select articles and information that discuss the challenges and help lead members to solutions to their expansion plans.
Carlos Poza is vice president of international affairs for the International Franchise Association. He can be reached at 202-662-0760 or email@example.com .