Leveraging IP Assets to
Enter Foreign Markets
Transaction franchise company
example
International Expansion
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franchising is an international activity
more than 400 U.S. franchise companies
– operating in foreign markets
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adds revenue sources and grows markets
– KFC - U.S. vs. China
• reduces dependence on home market
• leverages existing IP, know-how, technology
• no longer exclusively an American export
• 2 key issues (below)
When to Enter Foreign
Markets (1st Issue)
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sufficient maturity of franchise system
U.S. franchisor had 137 domestic outlets
tweak the business model (below)
selecting foreign business partners
selecting the right target countries
– TSS Photography - South Africa (late ‘80’s)
– McCafe - tested in U.S. 2001: 33 countries
• the market leader in Germany (306 coffee shops)
• transfer of PBS to foreign partners
• #1 trigger – inquiry from a foreign market
Tweaking The Business Model
for Foreign Markets (2nd )
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modifying domestic expansion strategy
master franchising paradigm
removes burden of foreign market operations
and selecting the right foreign franchisees
master franchising risks (McDonalds)
one-time fee: $100,000 - $1,000,000 or more
master & franchisor split FF’s and royalties
master becomes a clone of the franchisor
Tweaking The Business Model
for Foreign Markets (Cont’d )
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tweaking dual distribution strategies
tweaking the level of control
tweaking the training program
tweaking operations manuals
tweaking sources of supply, etc
developing the legal documents
strategies to reduce master franchising risk:
increase up front fees
lower ongoing royalty fees
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> 2,000 master franchisees worldwide
Preliminary Research & Steps
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research business, cultural and political
research cost & ease of doing business
research competitors in each target country
research the market in each target country
protect the IP (mark) in target countries
develop a profile of the master franchisee
research legal compliance in target
countries
• provide support, know-how & services?
International Marketing Steps
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add a page to existing Web site
process master franchisee leads
network with international systems (IFA)
attend international franchise shows (SG)
advertise in international publications
hold candidates to a structured process
Discovery Day
The Big Franchise Players
Company
7-Eleven
International
25,062
U.S. outlets
5,579
Company owned
1,039
McDonalds
KFC
Subway
10,946
6,089
5,932
11,608
4,277
20,265
8,269
3,067
0
Curves
2,005
7,875
2
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4,000 Best Western hotels in 80 countries
2,000 North America
2001: 6 hotels in Asia
2007: 106 in Asia
- 17 more in China, Japan, Indonesia, Thailand
• 2010: 200 (projected) in Asia
Howards Storage World
(Australia)
Howards Chronology
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1977: first retail store in Australia
1998: began franchising in Australia
2004: chain of 35 outlets
- master franchised West & So. Australia
- used the master model for international
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2004: 1st master franchise in Singapore
- master must own & operate a Howards store
- master subfranchises; all training in Australia
- Howards revenue: MFF + royalty (% split)
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2005: 2nd in New Zealand
Howards (continued)
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2005: 3rd in Spain
2005: 4th in the Middle East
2007: 5th in Ireland
2007: 6th in the Philippines
Howards International: 14 stores
about 20% of sales
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changes to business model = 10%
- supply logistics
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now 62 stores open in Australia