Home » Franchise » Globalization in franchising – What you need to know

Economic basis
A successful internationalisation strategy requires that a sound financial and personnel base has been established in the country of origin.

Due to the diversity of the European markets, it is comparatively difficult for the systems created here to achieve a sufficient economic basis, which is suitable as a springboard to globalisation and thus expansion into more distant markets.

Sufficient information base
Any rush to internationalise a franchise system is harmful. Instead of reacting spontaneously to expressions of interest from abroad or to market opportunities that have just been identified, a sophisticated strategy needs to be developed.

The selection and priority order of the target countries requires an intensive examination of the legislation and internal politics of each individual country.

Thus, harmful regulations in company law, competition law, tax law, labour law or contract law can call success into question. Discrimination against foreign companies or capital owners by the government of the target country can also have a negative impact on development work.

A restrictive licensing practice for imports and exports or strict exchange controls have also spoiled the enjoyment of internationalisation for many companies.

Staff qualifications
The company must not only raise the necessary financial resources, but also provide qualified personnel for internationalization. Managers with international industry, language and mentality skills must be found who are exclusively responsible for international business.

The majority of failures can be attributed to the absence of such basic prerequisites.

Adaptation requirements
The ideas developed in one country can usually be transferred to other countries and economic areas with certain system modifications. The establishment of pilot companies abroad is at least as important as in the country of origin.

The company’s service package must meet the specific requirements of the country and its cultural environment in order to ensure the company’s ability to survive. To this end, the contents of the system manual, advertising materials and training instructions must be checked and translated into the national language.

Difficult partner search

The search for foreign partners is also usually more difficult for franchisors due to the unfamiliar environment and different mentality than in their own country. The majority of franchisors feel unable to cope with the establishment of foreign branches and the granting of individual licenses abroad.

Although setting up joint ventures with established foreign companies is an alternative, the franchisor must bear part of the start-up costs and entrepreneurial risk. In addition, the dissolution of joint ventures after the end of the agreed cooperation is often difficult and costly. Where franchisors opt for internationalisation strategies, master franchising clearly predominates. A close-knit communication network ensures short decision-making paths regardless of the size or expansion of the system.

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