International expansion with franchising: the how and why

Part 1 in the series on international expansion through franchising

More and more franchises are considering expanding internationally. And for good reason! The Netherlands has approximately 18 million inhabitants, while the world has an estimated 7.5 billion. In short, the potential for a company that successfully crosses borders is enormous. Moreover, the Dutch are discerning consumers, and the Dutch market is relatively well-developed in areas such as e-commerce and the adoption of digital systems. This means that many Dutch concepts are well-positioned in the international competitive landscape. Yet, expanding internationally is often a challenge. Therefore, part 1 on international expansion through franchising.

International Expansion: Uppsala Model or Born Global

Uppsala Internationalization Model

Scientific research provides us with several internationalization models, of which the Uppsala Model is by far the best-known: expanding internationally like an oil slick to neighboring countries until, eventually, there are branches worldwide. Furthermore, the Uppsala model teaches us the following:

The first step is to establish distribution in a country.

The franchise model is ideally suited for this, as it allows the franchisor to maintain control over implementation and gain experience in a country. This, while limiting shared risks by acquiring local expertise.

The second step is to become active in a country itself.

For example, by establishing an office and/or, once the concept has proven itself in the country, establishing its own branches.

The third step is to also start producing locally.

Continuously importing products or systems creates logistical challenges and, depending on the country, currency risk. Therefore, it is often a logical step in the long term to produce locally or to build/support services.

The above model assumes that this happens like an oil slick, with a significant market share being achieved in one country before moving on to the next.

Born Global Internationalization Model

An alternative to this is Born Global. The starting point here is to immediately become active internationally. This model is primarily suited to products that can be shipped easily or services that rely on the increasingly digital world. In such cases, it may be more logical to consider the most attractive markets for the service offered, or the most suitable market conditions. Whether this is Germany or Korea is essentially irrelevant. The competitive advantage for a Born Global company comes precisely from its international activities.

For this reason, a company expanding according to the Born Global model doesn't wait until the Dutch market is saturated. A Born Global company starts out with the intention of operating internationally, because the international market as a whole enables the company to operate successfully, while the Netherlands is simply too small in every respect.

In the case of Born Global, the franchise model is also very suitable for limiting risks, making the company less capital-intensive, operating leanly, and still maintaining control over the brand and the product/service.

Various forms of international expansion through franchising

First, the strategy, including the target countries and the growth plan, must be determined. Once the franchise model is chosen, it's important to determine which form of international franchising best suits this. There are three common models: Direct Franchising, Master Franchise, and Area Development. More on this in Part 2.

Starting a franchise organization in the Netherlands? Find more information here.