When a business is looking to expand internationally, a franchise system is an attractive option. This type of corporate organization combines local knowledge and entrepreneurial spirit with the expertise of a franchisor. Moreover, foreign laws and regulations are typically more supportive of franchising because these countries tend to encourage local ownership, operations and employment. This helps make the international expansion process easier. However, there are a few challenges associated with establishing a franchise in a foreign country.
For one, franchising requires a great deal of investment and is highly regulated. It has a long track record of success. Despite the temporary setbacks during the global recession, franchising is now projected to be the fastest growing market entry strategy. In emerging markets, franchises are frequently among the first foreign retail businesses to open. The first McDonald’s store in Moscow was opened in 1999 with seating for 700 customers and 27 cash registers. Kentucky Fried Chicken opened in Beijing in 2000 and is the largest KFC store in the world.
Another important factor to consider is foreign laws and regulations. While franchising is friendly in many countries, there are several pitfalls that you should avoid. For example, if the franchisor is based in a country with a hostile environment, you’ll be less likely to be successful. It is important to know your rights and obligations. You may be surprised to discover that the law in your country does not allow you to franchise in that country.
For example, if your company wants to enter the Indian market, you’d have to consider the local laws and regulations regarding franchising. In India, franchisors may also be more cautious about the regulations in a new country. Nevertheless, it’s important to know your rights and responsibilities in foreign markets. The rules in a new country can be much more favorable to a franchisor than in a home country.
Even if franchising has faced temporary setbacks during the global economic downturn, the industry is still viewed as one of the fastest-growing market entry strategies. In developing countries, franchises were often among the first foreign retail businesses to open up. For example, the McDonald’s restaurant in Moscow opened in 1999 with a seating capacity of seventy-five people and twenty-seven cash registers. In Beijing, the Kentucky Fried Chicken franchise opened in 2000 and has become the biggest KFC store in the world.
The reason why foreign laws and regulations are more favorable for franchising is that the majority of these countries are more open to franchise businesses than their home countries. This allows for the franchisee to easily enter the market and take advantage of the potential there. Additionally, the franchisee can avoid the risk of having to hire local employees. For this reason, it is important to conduct a thorough analysis of the local market before entering a new country.