International Expansion: 5 Essential Factors To Consider Before Starting
At some point, as your brand grows, a time will come when the leadership team is sitting around the table and "going global" is the topic of discussion. It can be an exciting venture, and at the same time brings an entire new set of factors to consider. Where do we start? Do we have to adapt? How much do we have to adapt? Does our partner profile need to change? Does our franchise model need to change? What about our menu? The list goes on...
The extent of the answers to many of these questions, on many occasions, will be determined by the answer to the very first question. Where you start will be an important determinant in how your road to international expansion unfolds. Here are five key factors to consider when choosing where to launch your global expansion initiative.
1) Familiarity of offering
Are you entering a market where people are familiar with some version of your product/service? If your restaurant brand serves a specific type of cuisine, for example, is the market you're entering already familiar with this cuisine, or will the consumers need to be educated? If the latter is the case, you will then take on the role (and investment) of pioneering the market to educate consumers on your offering and build the demand. Should you choose to go this route, educational marketing and other similar strategies will be important for getting the customer in the door. On the plus side, this investment has the potential to pay off well, giving you an advantage over any future incoming competition, should the offering be well accepted. At the same time, it will be important to manage financial expectations, particularly on ROI, as the consumer education process could slow the ramp-up period. Entering a market where there is familiarity with your product/service reduces the need for consumer education and risk of non-acceptance. In this scenario, it will be important to analyze the competitive landscape.
2) Brand recognition
Does your brand currently have any level of brand recognition in the market? Nowadays, travel is easier than ever, and more and more people are becoming familiar with brands and concepts outside their home market. Notwithstanding the first point above, if there is a high level of recognition for your brand in the market, you are already ahead of the game. We've all seen it happen where a brand opens in a new market and there is a line out the door on opening day. This is a prime example of the benefits of entering a market where brand recognition exists. Doing the research to understand where you stand in the new potential market will pay off in the end for both you and your franchisees.
3) Market landscape
What is the current market environment in your sector in the new market? Is the economy comparable to the one you are currently operating in, or is it better or worse? By assessing the economic climate in your sector, you can gauge the earning potential of your brand in the potential market. What about competition? What is the current competitive climate? Who are the big players, and what are their unique selling propositions and success rates? Competition is a good thing, as it signifies demand. When assessing the climate of competition, be sure that the level of competition is not too high or near saturation, leaving little room for the introduction of new players.
4) Geographical distance
When expanding internationally for the first time, it can sometimes seem easiest to go to the first place where you receive interest from a franchise prospect. On one side, this could be a faster way to get the deal done. On the other, you could end up in a scenario with your first franchisee on the other side of the world, missing out on the benefits that come with expanding into a closer market. International travel and relocation are becoming more and more common, so it's likely that the population of neighboring or nearby countries has a higher percentage of clientele who have experienced (and like) your brand. Starting your international expansion in one of these markets allows you to take advantage of this brand recognition (see point #2). Additionally, when it comes to supporting, training, and managing your franchise partners, expanding into a market farther from home can pose additional challenges in managing time zone differences, logistics barriers, and travel time. If this is your first time going outside your home country, the initiative will require a great deal of attention, and it will be important to have easy access to the new market to facilitate supporting your franchise partners.
5) Cultural understanding
Every country has its own culture, both socially and professionally. No matter which country you choose to start in, there will be a learning curve to adapt to the norms of doing business there. It will also be important to understand the consumer, as you work with your franchisee to build marketing strategies and materials. For most of us, this is one of the reasons we have chosen to enter an international market through franchising. At the same time, before we choose to enter a market, we owe it to our franchisees and to ourselves to do our research. Consider starting in a country where you and your team have a higher understanding of how business is conducted in that culture. Understanding the cultural differences between your market and the entry market will facilitate the relationship with your franchisees and help you minimize cultural faux pas. The same goes for the language. If this is the first time you are expanding into a new country, starting with a country that speaks the same language as you do, or that has a sizable population of people who speak your language will avoid the need for translating manuals, simplify employee training programs and the opening process, and minimize the transfer of knowledge getting "lost in translation."
No matter where you decide to take that first leap, keep in mind that the more research you do beforehand, the better prepared you will be for this new and exciting venture. Going international is an important step for a growing brand and, if done responsibly, can produce remarkable results for both your brand and your franchisees.
The views, thoughts, and opinions expressed in this article belong solely to the author, based on his/her industry experience and expertise and are in no way a representation of Darden Restaurants, its employees, affiliates or other related group.
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