Five Strong Regions For International Franchise Expansion In 2020
16 Dec 2019 - For all the talk about how small the world is, it’s probably bigger than you think.
That can be helpful to remember for business owners who are franchising. You may feel like a market is oversaturated in, say, New York City or Boise, but there are plenty of places you can take your company where the competition is relatively thin and the consumers could be eager for American brands.
I’ve mentioned other frontiers in American franchising, like Sudan and North Africa, because this is obviously an ever-evolving list, and it isn’t as if there aren’t other parts of the world that are exciting for American brands. But if you’re looking for ideas for franchising expansion in 2019 and 2020, I’d suggest you consider heading to the following regions.
Germany And The Netherlands
For many years, franchising was kind of the Wild West throughout Europe. Historically, it hasn’t been regulated uniformly across the European Union, and while that may seem great – it can mean fewer rules – it can also cause a lot of confusion. Many countries in Europe may also worry about American culture diminishing their own. Protecting the French language was a concern in France for some time. But many European countries are becoming more franchise-friendly, and both Germany and the Netherlands certainly fall into that category. For instance, this November, the U.S. Commercial Service and the International Franchise Association (IFA) went on a franchise trade mission to Frankfurt, Germany, and Budapest, Hungary (another potential frontier on the franchising front). And between 2016 and 2018, the number of franchise stores in the Netherlands increased (paywall) from about 31,400 to almost 34,200.
Another reason to ponder Germany in particular as your next move is that it’s the most populated country (over 83 million people) in the European Union.
Pakistan And Bangladesh
I’m enthusiastic about South Asia in general, but Pakistan is a real bright spot for me right now. Don’t take my word for it, however. As Export.gov says, “The concept of franchising is quickly gaining acceptance in Pakistan, especially in the hospitality and food service sectors … Several major U.S. hotel chains, along with a rapidly growing number of major U.S. restaurants and U.S. car rental companies are currently represented in Pakistan through franchisees.” A number of major U.S. franchises already operate in Pakistan.
Export.gov is perhaps even more enthusiastic about Bangladesh: “Bangladeshi companies continue to show strong interest in opening U.S. franchises. There are no regulations barring franchise operations and growing access to global supply chains has improved product quality and reliability.”
But it isn’t just about the two countries, and many countries in South Asia, being franchise-friendly. Much of the appeal for me is simply that the middle class is growing. Pakistan may have a reputation for being impoverished, but it also reportedly has a flourishing middle class. Meanwhile, Bangladesh's poverty levels by headcount were consistently going down as of 2016.
Australia And New Zealand
These can be tougher nuts to crack than you would think. Like the United Kingdom, culturally, they’re a nice fit with the United States, and while Australia has three times more franchising outlets per capita than the United States, most of them are Australian brands. In fact, only 5% of the Australian franchise market is made up of American companies. So, yes, there is room to grow for an American company willing to put in the work.
New Zealand had more franchises per capita than anywhere else in the world in 2017. American brands may also be a good fit culturally, and New Zealand has a very entrepreneurial culture -- as of 2016, small businesses represented 97% of all businesses in the country. I’m not sure why any American brand wouldn’t consider going to both of these countries.
Mexico And Central America
Mexico and Central America (including countries like Honduras) have their share of poverty but also have their share of misconceptions. There is reportedly a healthy middle class in many countries, especially in Mexico. And franchising is growing. In Mexico, according to Export.gov, franchising grew by 9.8% in 2018. It could grow by at least 10% by 2020. That's not to say that this is an easy country to enter. As the International Trade Administration pointed out in a report several years ago, “U.S. franchises must be aware that the Mexican market is dominated by local franchises. For a franchise concept to be successful in Mexico, the concept and its characteristics must be adapted or customized to suit Mexican tastes.” Still, they also noted that while the biggest cities could be the best bet to start off in, “the creation or development of franchise business opportunities has also been successful in smaller cities. This trend is due to these populations looking for new products or brands, including international concepts.”
Some countries in South America may not be doing so hot right now – for example, Venezuela has been struggling – but Argentina is another story. I believe it's simply a good country in which to do business. According to OECD data, 44% of the population was middle class in 2016. It’s an exciting time to be in Argentina. They’re working on what would reportedly be Latin America's first solar-powered train. It’s worth noting that tourism was up as of 2017. In other words, Argentina, like many of the nations on this list, is a country where many people are going. American brands should consider going there, too.
Are you interested in other countries that should be on your franchise’s international expansion hotlist? Here are some others I’d include in the next frontier.