Masterclass international expansion: setting up an international franchise formula

Increasingly more franchise concepts are considering expanding across borders. And for good reason! The Netherlands is home to approximately 17 million people, while the world population is estimated to be 7.5 billion. In short, the potential for a company that successfully ventures into international markets is enormous. To transform your concept into an international franchise concept, thorough preparation is essential. You'll need to make many decisions, including the method of international franchising. In our Masterclass on international franchising, we go over the different methods:

The different types of international franchise concepts

Direct international franchise

In direct franchising, you enter into a franchise agreement directly with a franchisee in a foreign country. One advantage of this is that you can communicate directly with the franchisee. There is no third-party involvement, so all fees go directly to you as the franchisor. However, you must consider language and cultural barriers. Moreover, it is more challenging to maintain control over the entire franchise concept due to the larger physical distances involved.

International master franchise

A Master franchisee acts as a franchisor in the respective country. They are authorized to enter into franchise agreements with franchisees. The master franchisee often has the obligation to first set up a pilot in the country. The advantage of a master franchise is that the master franchisee understands the local market, eliminating the need for market research or establishing a local office in that country. The master franchisee speaks the local language and understands the culture, making it easier to overcome these barriers. The downside of a master franchise is that you have to share earnings. A portion of the fees must be allocated as outlined in the master franchise agreement.

Area Developer

An Area Developer resembles a master franchisee in some respects and a multi-unit franchisee in others. An Area Developer can operate as a franchisee by opening outlets in a specific (large) area. There is one fundamental difference from a master franchisee: the Area Developer operates in the name of the franchisor. The Area Developer recruits franchisees who enter into agreements with the franchisor, rather than with them as a master franchisee. An Area Developer also provides services to franchisees on behalf of the franchisor and receives part of the fees in return. Compared to a master franchisee, a large country is often divided into several areas by an Area Developer. A master franchisee usually receives an entire country or at least a significant portion of it. An Area Developer often gets a state or a few provinces. Thus, an Area Developer structure reduces risks and increases competition among franchisees. However, Area Developers are often harder to find due to the necessary investment for several self-managed locations.

In addition to the types of an international franchise concept, there are several other factors to consider:

• In which country do you want to launch your international franchise concept?
• What growth model suits this best? Uppsala model or Born Global?
• Systems, procedures, guidance, and training must be adapted and fine-tuned to the country’s customs, culture, language, and other differences.
• Inventory of the legal challenges in the country.
• Development of (franchise) agreements, franchise manual, website, and other acquisition materials in the right tone of voice.
• Marketing plan to attract international franchisees and customers.
• etc.

Masterclass international franchise concept: become a master in franchising!

Koelewijn & Partners has assisted various franchise concepts with successful international expansions across the globe in recent years. Through short lines of communication with our international partners, we can quickly gather necessary insights and, if desired, connect you with reliable local market players. First and foremost, it is important to decide in which country you want to expand, which cooperation model you wish to use, and which growth model fits this. This is what we focus on in our Masterclass on international franchising. Subsequently, it is essential to work out the other mentioned aspects. We would be pleased to discuss the international expansion of your concept with you.