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How to open an international franchise
What everybody ought to know about opening a chain overseas or just across the border.
You’ve got the experience to operate a successful business, you’ve got a clear plan and you’re ready to hit the international market. There are some basics you’ll want to invest time in researching, and we’re here to help. Let’s go over the big picture of opening an international franchise, talk about how to successfully plan your next venture and most importantly discuss how you’re going to get paid.
Choosing the right chain
Arguably the most important part of opening up an international franchise is choosing the right chain.
How to research
One of the top ways to figure out if a chain is right for you is to talk to some existing franchisees. That doesn’t mean you have to drop everything and fly to the location you’ve got your eye on, though you certainly can. Talk to local area members of the chain first and get their take on what it’s like working with the company.
Another way to research a franchise is by contacting the franchisor directly. Find out how they operate, how they solve disputes with franchisees and what the pain points that can surface with franchisees in the location you’re interested in.
Ask to look at the franchisor’s Uniform Franchise Offering Circular (UFOC), which usually includes:
- Brief history of the franchise
- Fees and royalties
- Summary of the officers, directors and other execs
- Any major civil, criminal or bankruptcy actions that the execs have been involved in or the franchise is a party to
- Terms of the franchise agreement
- List of the approximate initial costs of starting the franchise
- Reasons a franchisor can terminate before the contract expires
- Franchisor’s responsibilities to you, including things like: providing a training manual, picking a suitable location, training you and your employees, helping you plan your grand opening, giving you help with advertising and managing the store and so on
Try to get a feel for how the franchisor decides on who they choose to be a franchisee.
Factors to consider
Here are some good points to look into when you’re doing your research:
- Domestic and international success. Look into how the company has faired both in recent times and historically. Needless to say getting in with a franchise while its business is in a lull may not be a great way to set yourself up for success.
- Are there grants or discounts? Some franchisors will discount or waive its franchise fee for certain groups. For instance, Subway, 7-Eleven, Dunkin’ Donuts and GNC all offer special deals for veterans who become franchisees.
- How have they treated other franchisees? This is where talking with existing franchisees comes in handy. Get a feel for how the company interacts with its stores. Are disputes resolved easily? How much control does a franchisee have? Try to visit stores in different locations to get a good sample of experiences.
- Your experience in the industry. There’s a lot to be said for having previous experience within the industry of the franchises you’re researching. You’ll probably be able to get a much better read on how well the company knows its market and products.
Best chains to start franchising with internationally
Here are some of our top picks for starting a franchise internationally.
|Franchise name||Industry||Starting costs||Discounts|
|Dream Vacations||Travel planning||$3,250–$21,850||20% off the initial franchise fee for active or retired veterans and first responders|
|Stratus Building Solutions||Commercial cleaning services||$3,450–$50,350||10% off the initial franchise fee for veterans|
|Jazzercise, Inc.||Fitness instruction||$9,000–$38,000||None|
|Anytime Fitness||Fitness instruction and gym||$89,350–$677,800||20% off the initial franchise fee for veterans|
|7-Eleven||Convenience store||$100,000–$1,000,000||20% off the initial franchise fee for veterans|
|Subway||Fast food||$116,000-263,000||Waives the initial franchise fee for veterans opening a Subway on a military or government location; 50% off the initial franchise fee for veterans opening a Subway on a non-government location|
|JAN-PRO Cleaning Systems||Commercial cleaning services||$172,750–$757,000||Up to 20% off the initial franchise startup costs for veterans|
What are the pros and cons of getting into different industries?
Not all industries are created equal. Let’s go over the good and bad of some of the top franchise sectors:
Hotels and resorts
- The potential returns on your initial investment are high if you can get in with a good franchisor, snag a good territory and can successfully operate the franchise.
- Everything will be pretty formulaic. The franchisor likely has a full turnkey that keeps things standardized across the board.
- Franchisors may be willing to offer you financial assistance.
- Hotels are a steep investment. It’s likely going to be very expensive to start, and there are bound to be ongoing costs.
- You likely won’t get to pick a location. Hotels are set up in territories to avoid overlap wherein two of the same franchise might end up competing for business.
- Formulaic is great to start, but it also means you won’t have much creative freedom.
- Many fast food and casual dining restaurants have successful franchises around the country and internationally, which makes their success easy to assess.
- There’s always a demand for food and people often seek familiar brands when it comes to eating out, so you’ll likely have a good foundation to launch from.
- Training is almost certainly included with your investment. Restaurant franchises are especially inclined to want a consistent experience across the board, which means rigorous, thorough training.
- Compliance can be tough to keep up with. Depending on where you are, you may be initially unfamiliar with the region’s specific codes.
- You’ll likely have to deal with a high turnover rate with employees. Working in kitchens and waiting tables are stressful jobs, so expect to deal with staffing needs regularly.
- Equipment is expensive and you may not make as high of profit margins as other franchises.
- Demand for convenience stores is pretty consistent, so you’ll likely have a steady customer base.
- Convenience stores also generally have pretty tight turnkey operations, so you’ll likely have a solid operation straight from the get-go.
- Labor is comparatively inexpensive due to the low level of training needed.
- A good deal of convenience stores are operational 24/7, which means either you or someone very reliable needs to be present or on-call at all times rather than just during typical business hours.
- You’ll inevitably have to deal with inventory losses. No matter where you are, it’s bound to happen.
- Given that workers are generally on the lower end of the pay scale, you’ll likely see a lot of turnover in this industry as well.
- Lengthy legal documents, policies and waivers are likely already going to be drawn up and ready to go.
- Your franchisor may provide the equipment to start you off, taking off a huge chunk of what it would cost to open up solo.
- When you open up your gym you’ll likely have a pre-established membership base of consumers who are loyal to your franchisor’s brand.
- Workout equipment is bound to suffer some extreme abuse. When any break down, it’ll likely be on you to replace those costly machines.
- Your success is going to be weighed against the rest of the company. Customers who don’t like your gym as much as the one two cities over may complain and cause discord with the franchisor.
- Similarly, a bad move by the company will reflect poorly on your gym.
- The buy-in for commercial cleaning franchises is generally pretty low compared to restaurants and convenience stores.
- Demand is very steady and repeat clients are frequent.
- Franchisors will often provide you with support staff to begin with.
- Similar to other franchising opportunities, you likely won’t have much say regarding your location.
- When times get tight, many people drop their hired cleaners in favor of saving money by doing it themselves. During economic downswings, you may notice your client list diminish.
- Travel is necessary. Whether it’s going to locations to scout new clients or meet existing ones, you’ll likely be on the road quite a bit.
What you’ll need to get started
- A business plan.
- Personal banking, income, asset and liability documents.
- Money or a financing solution.
- Research of the location, regulation knowledge of the industry and a grasp on other legal requirements.
- A firm understanding of the Financial Disclosure Document (FDD).
Steps to setting up an international franchise
- Scout the area.
- Research the industry and its current trends.
- Research relevant franchises.
- Select a franchise and prepare a business plan.
- Review the FDD and fully sync with your franchisor on expectations.
- Procure funding for your new venture.
- Purchase the franchise location.
- Undergo any training, setup and hire staff if necessary.
- Keep in frequent contact with your franchisor.
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Related links to get you going
You’ve got the big picture down. Here are some additional resources so you can zero in on how to make each part of your plan succeed:
- Top 100 global franchises
- How to buy or start a business overseas
- Compare franchise financing options
- Compare international money transfer services
How chains are different around the world
A big part of the process of opening an international franchise is that first step, scouting. Chain locations have the potential to be different from the ones you may be accustomed to in the US.
In Israel, if you go to McDonald’s you’ll likely notice that there are two tray colors; one is for anything that’s touched or been near meat and another is for anything that’s touched or been near dairy. The distinction is to help keep strict dietary needs in check. There are also locations that keep completely Kosher and serve no dairy products.
In Asia, 7-Elevens are seen as more than just a quick stop to pick up essentials and snacks. These chain convenience stores in Taiwan often offer dry cleaning, while in Indonesia they’re seen as a cool place to hang out with friends — sipping coffee and browsing the Internet.
To get a complete idea of what you’re stepping into, it’s incredibly important you understand the regional differences and experience a successful operation near the location you’re interested in. Research is invaluable to your venture, and comparing all of your options thoroughly will undoubtedly help you on your way to achieve your goals.
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