With the financial crisis hitting hard, American restaurants are trying more and more to target foreign markets. In order to be successful, localisation seems to be the key.
A recent article at QSR explains this year’s Global 30 study; a study that lists the brands that have been successful in international franchising. It also states the most important trends, regions and developments on the international market. This year, it seems to be all about tapping into those markets abroad.
Brands do not only aim for the foreign market because of the vast opportunities; some brands are simply reaching their maximum growth inside the USA so are forced to look outside. Examples of this are McDonald’s and Subway, which have over 14,000 and 25,000 units inside of the USA respectively.
Moreover, America’s difficult economic climate is also forcing brands to expand their horizons if they wish to increase their size and profits. Karen Spencer, partner at franchise consultant Fran-Systems, says: ‘When the credit kind of crunched in the United States and franchisees weren’t able to get bank loans like they were years ago, brands were really saying to themselves, ‘We’re forced now to go international because we can’t sell franchises here.’’
Although the global economy is also facing problems there are many countries and consumers out there that are willing to try their hands at an American franchise. ‘Capitalism is spreading around the world, and a close cousin to capitalism is consumerism. There’s a growing middle class, growing disposable income, and a growing desire for Western brands and some of the Western culture that we take for granted here,’ says Bob Wright, president and COO of Charley’s Grilled Subs.
Many American companies are more than eager to fulfil this desire. Beth Solomon, president and CEO of the National Association of Development Companies, believes the global franchise industry will be worth $5 trillion in 2020. In addition, within a decade, half of the shops of the 200 most franchised brands will be overseas. For Domino’s Pizza, this prediction has already become reality. More than half of the stores the brand owns can be found outside the US, and an important part of its royalties are also retrieved from abroad, says executive vice president Ritch Allison.
Opportunities do not equal a challenge-free process however; even domestically very successful brands must often start from scratch on the international market. Wright: ‘We go into a new market like Bahrain in the Middle East or Poland or Eastern Europe, and those are very difficult hurdles. You can spend upward of a year getting the supply chain up and running.’ Especially for young brands, entering foreign markets often also involves high expenses, risks and can take up a lot of time, says Spencer.
One of the challenges that arises in going global – tackling the targeted culture – can also be turned into an advantage. Even its own culture can be used to the brand’s advantage as American brands and customs often appeal to foreign customers.
Solomon: ‘These quick-service American brands give people in these countries a chance to taste it, feel it, see it, walk into the store. They can experience American culture in a very direct way.’ Many cultures also regard American products as superior, safe and healthy.
Charley’s has used this reputation to its own advantage by pointing out its USDA choice steak offerings. The brand did have to switch up their menu in the Middle East: there, the beef has to be Halal-certified and the meals definitely mustn’t contain bacon. This alteration was fairly easy, but the company has failed to enter the Indian market. Here, the menu challenges were a little more intricate as the country has a big vegetarian culture. Wright states that getting rid of the Philly Cheese steaks would change ‘the core of the menu.’ This is why the brand decided not to enter the Indian market.
Jaremy Vitaro, vice president of international development for Dunkin’ Brands, has written that the company localizes the menu according to the specific culture of a country. The Chinese Dunkin’ Donuts menu thus features Mochi Ring Donuts and bubble tea, while the Baskin-Robbins in the country sells Green Tea and Mango Mania ice cream flavours. To ensure products are right for the market, the company uses its international partners to inform them about the consumer’s preferences: ‘We are able to leverage their knowledge of the local consumer to provide our guests with the right product mix and, in turn, position our brand for greater success in the market.’
Allison believes international operations really depend on these partnerships with locals. ‘Growth in any market revolves around finding the right local partners. We believe finding the right partners, teaching them the business, maintaining strong relationships, and providing them value for their investment is what works, no matter what market you’re talking about.’
Having local partners is important, but finding the rights ones is even more crucial. Wright says that Charley’s, which has 210 franchises, carefully selects their partners: ‘We want to go in knowing we’re signing a multiunit agreement with a partner that can help us develop in that region, somebody who knows how business works in that part of the world. Somebody who has the experience with people, with the supply-chain needs, … and the ability to do business in the construction and real-estate environment.’