Three steps to international success
Thinking of investing in a go-ahead franchise with its sights set on overseas expansion? Make sure you check the three golden rules for a franchise business according to Rod Young, DC Strategy, who has represented the Australian franchising sector around the world
1. Ensure the business is well on the way to having developed the local market as this will make the highest return on every dollar that is turned over.
Experience has shown that regardless of the business model used to expand overseas, the business is more profitable in the Australian market so franchisors should ensure they are fully exploiting it.
2. Ensure the franchise has a senior executive who spends all his or her time on the international development project. Most businesses who go international simply give another job to a fully utilised executive and expect a herculean task to be performed part time on top of a local job. It never works.
3. Check there is commitment at the top of the organisation to ensure there is a realistic budget and a profitable base to draw on for the first three years. Even an initial master franchise fee or two will not plug the cash gap needed to develop, market, enter and then make profitable an international market.
I estimate franchisors should allocate at least $500,000 per annum for the first three years and have a three year commitment to provide at least this funding before expecting any return.