Deciding whether to franchise your business in the first place is distinct from franchise expansion. The former entails a variety of steps to determine whether your business would succeed as a franchise business. It could end with you rejecting the idea of franchising and opting, instead, for smaller, more controlled growth. The latter involves a business that has already proven successful as a franchise business. Expanding this franchise business by opening more franchises in previously unexploited territories, regions, and even countries will make it possible to maximize the franchise company’s profits.
Sometimes franchise expansion is something that is considered as a long-term goal, right at the beginning of the franchising process. The franchise company typically starts small, expanding locally, and translating the franchise formula into success close to ‘home’ before considering larger conquests nationally and internationally. In this case, franchise expansion occurs in phases. This is a wonderful way to expand because, by the time the franchise company opens its doors to international franchisees or to franchisees in previously ‘unconquered’ regions of the country, it has established that it has potential for great success. This, more than anything, helps to win over potential franchisees who are shopping around for a franchise company to approach.
Some of the Complications of Franchise Expansion
Franchise expansion on an international scale brings into play issues that a franchisor probably has not had to deal with previously. One of these is the issue of the franchising laws in the country into which the franchise is expanding. Some countries simply do not have laws regulating franchising. Alternatively, they may have such laws, but they could be underdeveloped in comparison to the franchising laws that exist in the franchise company’s home country. The problem with venturing into new markets where franchising is not legally regulated is that legal issues might arise, putting the franchisor or franchisee in a position of great disadvantage. If this happens, then there is no legal basis for resolving these issues. Either party could incur great losses as a result. Franchisors are also likely to want to protect their trademarks and to feel concerned about their limited capacity to do so in countries that have poor franchising laws or don’t have any to speak of.
There are various models for franchise expansion. A particularly intriguing one involves partnering with a franchise business that already has infrastructure in the region or state into which you want to expand. This can be a mutually beneficial relationship, allowing each franchise company to benefit from the other’s infrastructure. It dramatically reduces expenses. However, it can create extra legal complications if it isn’t well-thought through and if the associated contracts are not drawn up well.