International expansion with franchising: the how and why

Part 1 in the series on international expansion with franchising

More and more franchise formulas are considering expanding across borders. And with good reason! Approximately 18 million people live in the Netherlands, while there are an estimated 7.5 billion people worldwide. In short, the potential for a company that successfully crosses borders is immense. Additionally, the Dutch are critical consumers, and the Dutch market is relatively well-developed in areas like e-commerce and digital system adoption. This positions many Dutch concepts well in the international competitive field. However, expanding internationally often poses challenges. Hence, here is part 1 on international expansion via 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: International expansion spreads like an oil slick to neighboring countries until, eventually, there may be establishments worldwide. Additionally, the Uppsala model teaches us the following:

The first step is to set up distribution in a country.

The franchise model is ideally suited for this, as it allows the franchisor to maintain control over execution and gain experience in a country while sharing and limiting risks by acquiring local know-how.

The second step is to become active in the country.

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

The third step is to also produce locally.

Continuously importing products or systems creates logistical challenges and, depending on the country, currency risks. Therefore, in the long term, it often makes sense to produce locally or to build/support services.

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

Born Global internationalization model

An alternative is Born Global. The premise here is to become internationally active immediately. This model mainly fits products that can be easily shipped or services that rely on the increasingly digitalized world. In such a case, it might be more logical to look at the most interesting markets for the offered service or the most suitable market conditions. Whether that's Germany or Korea is actually unimportant. The competitive advantage for a Born Global company stems precisely from its international activities.

For this reason, a company expanding according to the Born Global model does not wait until the Dutch market is saturated. A Born Global company starts with the intention to operate internationally from the outset, as the international market as a whole enables the enterprise to operate successfully, while the Netherlands is simply too small in every respect.

Even in the case of Born Global, the franchise model is very suitable for limiting risks, making the enterprise less capital-intensive, operating lean, and still maintaining control over the brand and product/service offerings.

Various forms of international expansion via franchise

First, the strategy, along with the target countries and growth plan, needs to be determined. Once the franchise model is chosen, it's important to decide which form of international franchising best fits this approach. There are 3 common models: Direct Franchising, Master-Franchise, and Area Development. More on this in Part 2.

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