International Growth Session Highlights from the 2024 Multi-Unit Franchising Conference

A high-level panel discussion at last week’s 2024 Multi-Unit Franchising Conference (“How Franchise Brands Grow Outside Their Home Country”) provided advice—both encouraging and cautionary—for franchise brand attendees looking to expand outside of their national borders. Whether U.S. brands eyeing overseas growth, or international brands looking to expand into the U.S., the expert panel had something for everyone.

Kay Ainsley, Managing Director at MSA Worldwide, and Glen Helton, Vice Chair at NSP (Nordic Service Partners), were the expert panelists in a session facilitated by Therese Thilgen, CEO of Franchise Update Media, which hosted the conference.

Also on hand was Eric Johnson, Global Team Leader–Franchising at the U.S. Commercial Service, which advises and assists U.S. companies looking to expand abroad. (To learn more, email or phone him at 404-290-2169.)

The panel began by discussing the pros and cons of whether to develop through a master franchise agreement (most common) or another model (e.g., direct franchising, multi-unit development, or joint venture). See more on this topic from Ainsley here.

A key factor on the road to overseas success, said Ainsley, is having 100% buy-in and commitment from the brand’s top management. Without that, your chances of success are reduced significantly.

Also, she emphasized, brands should not look at overseas expansion to solve their domestic problems, whether those are financial or with unhappy franchisees.

Helton pointed out potential problems with supply chains, especially for countries or regions such as the Middle East, which rely heavily on imports over domestic production.

Both stressed the need for patience and taking the long view, noting that it takes three times the cost and three times the time to develop a market in a new country. “The payoff won’t be there for some time,” said Ainsley. Figure 3 years, said Helton.

And, of course, conduct your due diligence—lots of it! Doing business in different countries can involve problems with ensuring product/service quality, construction, legalities, real estate, local health codes, etc. In short, all the problems a brand faces in its own country, plus more, several of which may be unfamiliar or even unexpected.

Not to mention marketing challenges introducing your domestic products into new countries. Are you introducing a new brand with little or no in-country name recognition? That could lead to an epic fail, and has for more than a few U.S. brands. Or a new product or service. It may come as a surprise to most Americans, but not everyone knows what a smoothie is, said Ainsley.

Then there are the cultural issues—and flubs. Helton pointed out several he’s seen over the years and recommended franchisors start by reading the classic primer on doing business internationally, “Kiss, Bow, or Shake Hands” by Terri Morrison and Wayne A. Conaway.

Language, of course, could be a problem. Although U.S. companies are at an advantage because so many people around the world speak English as a second language, nuances are often lost in translation, you might say. Linking with a fluent local representative or consultant can save a lot of future headaches when negotiating a deal.

A common problem involves ops or training manuals, especially for training front-line and back-of-house employees in countries with a low literacy rate—even if those manuals have been translated by experts, said Ainsley. Helton said he’s found YouTube training to be highly effective—no voiceover required. In his experience, employees learned faster with a digital “how-to” video than by using a printed manual. Thilgen noted that the growing use of AI will likely have a very positive impact on training.

Other issues to consider

1) While drive-thrus saved QSRs in the U.S. during the Covid-19 pandemic and continue to grow in both size and number, many countries have few drive-thrus, or none at all. Instead, successful models that succeed in the U.S.’s car-centric culture must look at adapting their model to open overseas locations in traditional or inline malls—which may not be feasible in terms of recouping their investment of time and money. Again, take the long view.

2) Fitness, spas, and other brands whose revenue is based on a membership model can run into trouble in countries where credit card usage is low, severely reducing that steady stream of revenue so critical to success. Those brands must make significant changes to their business model to achieve their desired margins, or even to survive in those countries.

3) Brands must adapt their menus to different palates, as well as to different cultures and religions. (See Article #2 in this newsletter, “3 Important Considerations in Adapting Your Restaurant Menu for Global Success.”)

4) Fee structure, royalties, and currency exchange rate fluctuations can affect your ROI in many and significant ways. And what about political unrest, as what’s happened with franchise brands in Russia? Can you collect your royalties at all?

Wrapping up

So when should a franchise brand think about going international—or not?

“If you’re in 7 states in the U.S., before going overseas, consider the other 43 first,” suggested Helton.

“Take stock of where you are,” advised Ainsley. “You have only so many resources. Are you better to fully develop the U.S. or to go overseas?”

It’s a big world after all…