You have made the decision to expand your franchise into other countries. You believe there is a niche for your brand outside your home country. Your franchise is doing well at home and your training, support, intranet and marketing resources for franchisees are well developed.
You have lots of leads from various countries but you have limited resources to pursue licensees. You want to focus on countries that have the highest potential return on investment for your franchise. How can you rank other countries as places to succeed for your specific franchise?
Our experience working for over 40 U.S. franchise brands as franchisors, international licensees and consultants in over 30 countries for more than three decades indicates that there are at least four major factors to consider when ranking countries for your franchise: Size of the consumer market for your brand, Differentiation, Risks, and Culture. There are many questions to ask before you spend time and money seeking a license for a country and certainly before you make an agreement.
When you enter a country it is essential to determine the size of the consumer market for your brand. Are there enough consumers with the cash--and desire--to frequent your franchise to make the units profitable? Do not go by population. Seek information on the buying power and consumer trends that can help you figure out how many consumers will want to and be able to buy your products or services. China has 1.3 billion people of which approximately 105 million are classified as upper middle class and upper class consumers. Also figure out where the those potential consumers are in a country. India's 250 million middle class consumers are mostly in six cities in this very large country.
What is the buying power of the consumer in a country? In India it very low even in the middle class. McDonald's has US $1.00 burgers. The average Big Mac, fries and diet soda meal in Switzerland was US $6.72 and in Shanghai US $2.16. On average, the same meal is US $4.80 in the United States, according to The Economist magazine's Big Mac Index of 2015. Think about how product prices in a country will impact your franchisee's profit and loss statement--and your resulting royalties.
A word about size. It will take you just about the same amount of legal investment (trademarks and agreement), licensee due diligence investment, licensee training and start-up investment for a small country as...