A franchise is the license granted by a company, known as the franchisor, to an individual, the franchisee. It gives the franchisee the right to trade products or services in a specific area or territory. Global franchising, therefore, allows franchisors to expand overseas.
Global franchising is an expansion method used by franchisors who wish to move into new markets and areas. Today, 16% of franchises are global franchises (Frankart Global). It can be a strategic way to lower dependence on domestic demand while growing future revenue and profit centres worldwide. Extending a brand internationally through franchising offers huge upside potential for scaling capabilities. Involving low risk and requiring minimal investment, it can be a great option for many franchises.
When franchising in the franchisor’s original country, the franchisor gives the franchisee a license to use the branding, marketing and operations of the franchisor. Global franchising, on the other hand, usually involves selling the rights of the franchise to a third party to work as the master franchisee in that area. This gives them the rights to sub-franchise and open company-owned outlets in the region or country. Before deciding to expand a franchise internationally, the franchisor must first decide on a business model to take their franchise global.
Master franchise rights are awarded to the entrepreneur you choose in the target country, who then make a large investment. Then, the master franchisee runs several new businesses using your model. This is the simplest way to grow your business internationally.
Master franchise owners are typically a native of the country, and therefore understand any political and bureaucratic problems in their own country well. These local franchisees can also overcome language and cultural barriers to your target market. They pay a large upfront fee to acquire in some cases an entire country, where they operate as a sub-franchise company.
Also check out: Benefits of a Master Franchise
The direct franchise route allows you to retain control over your franchise. This route means that you will take full responsibility for the training and recruitment of employees, and you would operate all the units in the target country. Direct franchising works most effectively in countries who speak the same language, and with similar legal systems and cultures. This is because franchisors manage their franchise locations remotely.
A regional franchise model divides the country into regions, as some countries are too big for a master franchisee to manage. These sub-sections are regarded as ‘mini master franchises.’ The regional franchisee sells individual franchise units to other investors.
In some countries or industries, regional franchising is not allowed. If a territory is too large to be managed by one franchisee, it’s divided. An area development agreement requires a single franchise to run all the units in their location. There are advantages and disadvantages to all of these franchise models, therefore it is important to do your research to find which will work best for you.
Benefits of Global Franchising
There are many advantages that come with global franchising. It allows organisations to enter markets overseas, reach new customers and increase their products. It also comes with a lower risk compared to traditional company-owned expansion. Another benefit is that the organisation doesn’t have to spend a lot of money and time in recruiting new staff, or relocating staff and offices to the area. Global franchising means that your franchise can be recognised and renowned internationally, which can help to further boost sales.
How to Franchise
Before expanding your franchise globally with Master Franchising, there are a few steps that should be taken. Firstly, decide on which countries you wish to open your franchise in. Consider which ones will be the best for your business, and generate the most profit. It is important to do market research to ensure that your chosen countries have demand for your franchise and little competition.
When you’ve decided on the countries you’d like to expand to, you need to think about adapting your business model for that region. Making a few changes to the product or service could mean your business is more successful in that area. Think also about the strategies you use and how you advertise.
Choosing the right candidates to be your franchisee is very important. It is essential that they have a great knowledge of consumer spending in the local market. If you’re looking for a master franchisee, take extra care with the screening process, as they will have lots of control once they sign the agreement.
An important step is to create necessary documents that your new franchisee will need to set up the business. This needs to be clear so that your franchisees have the right information to lead the company to success.
Global franchising can have great benefits for your business. If you want to reach new customers and have a globally recognised brand, then global franchising could be for you.
Browse a range of Master Franchises at Franchiseek Global Franchise Directory.