In recent years, franchising has expanded more and more into the international market. The number of countries in which the major international franchises have been represented has exploded, and the types of countries which are hosts to franchises have also increased. These include not only well established and culturally similar Westernized countries, but also smaller and more emergent markets have seen the rise of the franchise business – international travellers are often surprised at the number of places in which they are able to visit their favourite franchise businesses (such as restaurants and retail stores) from back home! What are some of the factors involved in the international rise in the franchise market? Let’s take a look at some of the reasons and how the international market has changed over the past few years.

The sixties were the decade which saw international franchising start to take off – there are a lot of reasons that this was the time that franchises went international; in the United States many franchises had developed to the point that the country was beginning to experience saturation – just after the Second World War the number of franchise locations throughout the United States exploded. The rise of the highway system and the large number of new families which had cars had caused franchises to grow throughout the country for two solid decades – at the same time countries abroad had started to enjoy better economic conditions and were in a position where it made good business sense for franchises to set up shop.

The first wave of international expansion in the franchising market was to other Westernized countries. Canada and the United Kingdom and countries throughout Western Europe were the first ones that were able to support international franchise expansion, as they had rebuilt their economies after the war and reached the point where they were beginning to expand at a rapid rate. Emergent economies have always been the best places to set up new international franchise chains, as the combination of a good exchange rate, relatively inexpensive and plentiful labour, and lots of new money coming into the economy make the perfect conditions for a franchise to thrive.

Over the following decades, the franchises that were able to act the fastest were able to capitalize upon their name recognition in the growing countries and were also able to become that much more entrenched. They became the most popular international franchises in the countries where they settled and developed a strong base which led to long term profits. Clearly it is best to get in on the ground floor when it comes to international franchising, and to choose the markets where there is still room for profitable expansion and where the return on investment will be the best.

Today, international franchising has expanded to the new emergent markets of countries such as China and India. Economic projections have held that over 75% of the growth which will be seen over the next twenty years will come from such developing countries where the economy is on the rise and a new middle-class is forming with larger amounts of disposable income and the ability to spend more and more on franchise businesses such as franchise restaurants and franchise chain stores.

The three economic statistics which are important to look at in determining which countries have the best prospects for the expansion of international franchises are the per capita GDP, the growth rate of the economy and the level of population. If these three factors are all high then the country in question is one of the best that you can choose for the expansion of a franchise into the international market and there is a lot of room for a franchise company to achieve great profits as well as the promise of further expansion in future decades.

The single most attractive country for international franchising at the moment is China, with a large population, excellent economic growth, and a GDP which continues to do nothing but rise as the manufacturing and other industries in China continue to expand. All of the major international franchising chains are expanding as quickly as they can into China so that they will be well positioned to reap major rewards during the next few generations of the franchise industry.

When a company wants to expand its franchise into the international market there are a lot of factors which must be considered. Legal counsel has to be acquired, with lawyers who understand the international market as well as the local laws regarding franchises of the countries where the new franchise expansion is planned. Many countries have special laws pertaining to franchises and a legal department with specialist knowledge of these laws is vital. Before the international expansion takes place the company should decide whether or not it wants to do business as a foreign company operating in the given country or whether it wants to create a new local company which will share the same name and answer to the company at home.

You also need to keep various strategic considerations in mind – how much of the resources and planning time for your business will you devote to the continuation of your franchise chain at home, and how much will you spend on the expansion in the new country. One of the reasons that companies generally create new headquarters in each of the countries where they will be doing business is not only to enable a better interface with the local legal structure, government, and so on but also to enable a clearer division of management priorities making it easier for the people working at the company to know where to direct their management attention.

Many of the costs which a company will experience when it expands its franchise into a new market are one off – and the company will try to find a country with the potential for the maximum amount of expansion (one of the reasons why a country with the highest population is a good choice for starting a new franchise). This gives the expanding franchise company the ability to amortize their initial investment in the expansion over the following years as more and more stores are built and the profits from the new country increase tenfold.

Clearly, once a company starts to become involved in international franchising it is of the utmost importance that they look at the big picture and think about how things are likely to develop five or ten years (or more!) into the future. The political conditions and economic conditions of the country in question are considered at the same time, and once the move is made there are a lot of new strategic considerations which have to be taken into account.

Every country has a different culture, so the franchise company will want to develop new lines of products, new advertising, new marketing images and campaigns, and a new way of interacting with the local population to create a new name for the company. If the franchise company is successful in thinking about how they may be perceived by the new market they can become a part of the new culture themselves and integrate themselves into a new part of the international consciousness.

Many of these situations which come up will require a high degree of corporate agility and the ability to quickly and easily adapt to new situations. If you are prepared to be fast and adaptive in the face of challenges, then you will be in a good position to handle taking your franchise to the international market. Many of the same personality traits that make you a success in the home market will be that much more important when you make the move to a new country, and you will have to be prepared for all of the issues that a start-up company commonly deals with – times ten!

After evaluating all of the issues with expanding a franchise to the international market along with the various benefits which a company receives as a result (beyond the massive profits which can result,-an international franchise is often able to enjoy a stronger support infrastructure and a much higher level of stability over time), more and more companies are finding that the international franchise market is the place that they want to be. If you are interested in growing your business to the largest size possible and the timing is right both in the country that you are thinking of expanding to and for the financial status of your company then you may find that entering the international market is the right decision for your franchise business as well!