Why Are American Brands More Successful In Franchising?

Written by Sparkleminds

American brands have always had a huge presence in the Indian market. This includes American franchises and 40% of all American businesses are franchises. In India, the franchising business is growing at 30% – 40% annually and is the second-largest franchise market in the world after the US.

In this article, we have found out why American brands are more successful in franchising, and how international brand franchises differ from Indian franchises. Stay tuned to know more!

What Is A Franchise? How Does It Work?

In a franchise system, someone else owns the brand. Meaning the franchisee or investor, pays an initial cost to the company to open a branch of their business in a specified area or location.

The franchisee is in charge of managing and running the business under the company’s license. And franchisees get to keep the bulk of the profits they earn through those sales after paying a small percentage to the parent company through royalties.

And the parent company provides any initial or ongoing support to the franchisee for the duration of their contract.

Licensing and Franchising In International Businesses

In international businesses, franchises and licenses are agreements where certain facets of the brand are exchanged for a fee. Franchise agreements are about the business’ entire brand and operations, whereas licensing agreements to apply to registered trademarks.

In a licensing agreement, a third party is allowed access to the brand’s trademarks. And to use those trademarks, the licensee pays the brand an agreed-upon fee. Compared to a franchisee, a licensee has more autonomy over their business.

So to summarize, franchises are mostly used for service-based businesses and licenses are more suited for product-based businesses.

Now that we’ve covered the basics let’s get into the whys and the how’s.

Why Are American Brands Successful Than Others?

Let’s take a look at some of the qualities international businesses and franchises have:

Communication

In the entrepreneurial world, Proper communication is the lifeline that saves your business.

US entrepreneurs can communicate in business situations with certainty, knowing they are getting their point across accurately.

Risk Culture

Risk-taking is deeply embedded in American culture. While playing it safe might sound like the easier option, you need to remember that change always brings discomfort. Companies with a high tolerance for uncertainty are better at dealing with consequences and making difficult decisions.

Strong In-House Presence

American brands have the advantage of starting from a strong base with a large GDP, and an addressable audience with similar buying patterns. This allows them to develop a strong in-house presence before expanding to an international market.

What Indian Franchises Overseas do?

Let’s take a look at how Indian franchises perform overseas in comparison.

Adaptability

When some Indian businesses with strong in-house audiences try to expand overseas, they often fail. Or they aren’t as successful. Why a lot of Indian brands fail to is, they try to adapt to the local market of the country or region they’re expanding to. Strictly sticking to one strategy or one way of doing things often doesn’t work if you’re looking to win over a diverse market.

Novelty

Most Indian franchises, when they expand to overseas locations, their products are mostly viewed as novelties. This goes back to the adaptability problem. Relying on authenticity might win over a niche audience, but if you’re looking to win over the masses. You need to cater to them.

Risk Averse

Indians have a pervasive culture of, “What will others think?” Which will eventually affect the way you run your business. This mentality can be detrimental to both your personal life and professional life. It prevents you from making hard decisions or taking risks even when they are necessary for your business to grow.

How Can We Solve These Issues?

Working With the Local Market

Might seem obvious but you’d be surprised at how a lot of brands don’t do enough market research when expanding to a new territory. Working with local franchisees and local business owners can be a huge advantage for your brand. They will be able to provide a lot of insight into the local audience’s spending habits, local trends, and local tastes and customs. Employing local counsel can also prevent you from stumbling into legal hiccups, which can severely impact your brand’s image.

Building Robust yet Flexible Businesses and Franchises

Most international franchises do well in the Indian market because they have models that are robust and flexible. Developed markets have better ways to support their infrastructure and they invest more money into branding and advertising to develop their image and brand name.

Indian businesses and franchises need to invest more into having the infrastructure to support all their real estate, banking, and supply-chain requirements.

Working with Master Franchisors

This can also tie into working with the local market. Sometimes, employing a master franchisor – a well-funded, local individual. Who works directly with the international parent company to set up and run sub-franchises within the region is a good approach. This strategy can have wide-reaching implications for your business and can overall improve your business growth.

In Conclusion

While international businesses and franchises may have more success in franchising within the Indian market. Let’s not forget that the Indian franchise market is still growing at a rapid pace each year. There is always room for improvement, and more in-house brands and companies are stepping up to the challenge.

If you’re interested in starting your franchise, visit sparkle★minds and sign up.

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International Franchising: Mistakes To Avoid

Written by Sparkleminds
sparkleminds

Franchising is a great tool to expand in different markets. International expansion needs proper planning. Most franchisors avoid it as they see it as a costly affair. This is only because they lack clarity on how to solve the problem. They do not see the side of rapid growth that can be achieved with international expansion. International franchising has made many brands bigger than ever through international franchises.

A system for global improvement has to be done on an evaluation of franchisor assets and a cautious assessment of the business. There are several issues faced when it comes to how to franchise internationally. The mistake franchisors do is keeping the same strategy for every market. Take pricing for example. A product pricing model that works in India will not work the same in the European countries. This also applies to the franchise fees, royalty, and almost all aspects of a franchise development strategy. 

The franchisor has to do a feasibility study to ensure the expansion is worth the costs incurred. An ill-informed understanding of country direct and indirect competition can often lead to challenges in a successful global expansion. Charges should be set solely after assessing costs. Expenses of shutting an international business can be higher than opening a franchise in another country.

In the early stage of your international expansion strategy, it is important to engage the services of a reputed franchise attorney who knows local counsel in countries where you want to develop your system.

As soon you consider expanding overseas, you must ensure trademarks are set in the countries you want your business to grow. International franchise contracts must be done attentively. The international franchise agreement is much different from the franchise agreement used locally.

Strategize for your International franchise Growth

How ready are you?
Franchisors should have a profitable business model. Core competencies to provide all levels of support and the ability to replicate these attributes in other countries. Management has to provide support to the franchisees just as it supports domestic franchisees.

Is your staff well trained for international Franchising?

Structure on how are your internal resources going to support the expansion. How will they be able to support franchisees in other countries in each area of the business? If you should use your current or if you’re planning to hire local talent is a major concern. Will it also be meaning a higher impact on the cost structure for the expansion? This needs to be well planned in advance to engage the franchise in a better manner.

What are the current finances revealing?

Expansion is an expensive affair. Hence, if you are hardly able to make good in the local markets, create enough funds which do not affect your current operations and your expansion process.

Have you done market research properly?


When it comes to international franchising, there cannot be a standard solution for everything. Every market has to be carefully researched to understand the needs of the business, the target market, and the franchise partner.

Failure to understand culture is very important. Such an absence of clearness can be a significant issue for franchisors setting out on an international expansion.

For example, McDonald’s had to modify their system to adapt to the market in India, where beef is not a traditional food item.

Look at the general mistakes done by the franchisors:

  • Expanded in country without conducting proper research if there was potential market to begin with
  • They did not make an organization structure with the right ethos able of managing with diversifying
  • They don’t have an adequate track record in local market and had exceedingly immature working frameworks
  • Did not develop a well thought-out and developed franchise package
  • No competition advantage to maintain profits in the long term.
  • Fee levels set are too high which does not allow sufficient returns to the franchisee.
  • No clue on the support & logistics structure
  • No infrastructure design to help the franchisee. This may be in terms of CRM, IT monitoring, reporting procedures etc.

Expansion does not only mean getting your franchise manuals in different languages. Training and support also are equally important. This requires dedication from all of your management. Solidapprehension of what you do well, and a willingness to work cooperatively with your franchisee to adapt.

International franchise development has opened various entryways for independent companies hoping to uncover new streams of income. The international establishment can be one of the most thrilling things you can do to grow your business and stimulate your idea. While it tends to be costly, tedious and here and there baffling, it can likewise be exceptionally fulfilling. If you conclude international franchise expansion is ideal for you, partake in the excursion—and make certain to keep away from normal slip-ups that can wreck your franchise system.

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