Ahead of Scottish International Week, Andrew Fraser, a member of Harper Macleod's specialist franchising team, explains why more businesses could be taking advantage of the benefits of international franchising.
What is International Franchising?
Put simply, 'International Franchising' is the granting of a licence by one business based in the UK to another based overseas, which entitles the latter to run their own business following the processes, procedures and training set out by the franchisor.
In return for management services fees, the franchisor (the one granting the licence) allows the franchisee to trade under the name of the franchisor and gives them a support package containing all that they need to operate that business along with ongoing support.
Who uses International Franchising?
There are the obvious fast food candidates that everyone knows (McDonalds, Burger King, Dominos etc.) but it might surprise most people to know that International Franchising is used in some shape or form by a wide variety of household names such as: Coca-Cola, Nike, Marks & Spencer, Hilton, TopShop, Ralph Lauren, Debenhams, Specsavers, New Look … the list goes on.
Some Scottish examples of international franchisors include: BrewDog, Quiz Clothing, German Doner Kebab, SmartPA and Baguette Express.
Why do businesses use International Franchising?
Fundamentally, they use it to increase sales and brand awareness whilst reducing overheads and other costs. Here are some of the main reasons for using International Franchising:
- Cost – If a business were to expand overseas itself it would have to bear all the development costs including property, staffing and other overheads in the overseas territory. Franchising allows them to partner with a franchisee and use the franchisee’s capital to set up and roll out the operation in a new territory. A large network of international franchisees also allows the franchisor to make significant savings on group buying discounts!
- Quick international brand growth – as expansion can be achieved easily through franchising it allows the franchisor to grow an international brand quickly.
- Local knowledge – a franchise partner based in a country knows all about the local market, the language and the business practices of that country. In particular, the right partner will know if any adaption is required to make the business successful in that country. For example, any Scottish franchisee for an American fashion brand will know that warm jackets should be stocked all year round!
- Market diversification – In an uncertain economic climate, it is beneficial to the franchisor to have operations in multiple markets to safeguard itself from adverse conditions in any one particular market.
Where can I find out more?
Glad you asked! Why not come along to the breakfast seminar that we are hosting as part of Scottish International Week (SIW) in association with the Scottish Business Network. The event takes place in our Glasgow office on Tuesday, 18 September from 8.30-9.45am.
To find out more and reserve your place visit the website here.