Ensuring Success of Overseas Franchise In Your Local Market

A quick search on the internet about overseas franchising produces hundreds of links on how franchisors can tap on international markets to expand their reach and how they can sell their franchises effectively overseas. That’s all good, but what about the franchisee? The story doesn’t just end with the franchisor successfully selling his/her franchise. The crux lies in whether the franchisee is able to market that franchise effectively and how the franchise can fit into the local market.

Information is your best weapon

Many would agree that running a franchise is considerably less risky than starting a business from scratch. However, it is wise to remind oneself that low risks do not mean risks free. True that implementing a proven business idea gives you a good head start, however implementing that business idea blindly may be catastrophic. Lesson learnt: Don’t depend on your lucky stars too often. Before making the decision to run a franchise, it is vital to be equipped with the right market knowledge – dig deeply and understand your potential market inside out. Just like any other business ventures, information is your best weapon.

While the franchisor may invest in research to ensure their products and services are meeting market needs, it is up to the franchisee to customize the products and services to the local market and to roll out a fitting marketing plan. A successful product or service in its home market may not enjoy the same successes in a foreign market. It is up to the franchisee to conduct systematic and comprehensive market research to understand the related industry, its consumers and the direct and indirect competitors.

Identifying key issues in a market study

The most important facets of the market study are consumers and competitors. What consumers need and want and what competitors are offering will have a direct impact on your business. Address the following:

1. Who is your target market? You need to be clear if there is enough business out there to justify starting up a franchise in your market, i.e. who you would be aiming to sell your product or service to? Is it a specific age group or sex, income, etc? E.g. if you’re looking to bring in a certain food product, you need to look at the taste preference, lifestyle, price, which age group would be more receptive to your product, etc. Consumer research is probably the most important phase of the research process as it would be meaningless if you have a good product or service but no customers! Consumer research also includes many areas including price elasticity testing, demand estimation, test marketing, etc.

2. Who are your direct and indirect competitors? Direct competitors are those who offer the same or a similar service to you, and your indirect competitors are those who offer an alternative to your product/service which may not necessarily be in the same industry. For example, if you are franchising a fast-food outlet, your direct competitors are other fast-food outlets selling products similar to yours. Your indirect competitors could be other fast-food products that are healthy and wholesome, or convenient food products which could also be prepared quickly.

After deriving information from the above two issues, franchisees can create a unique value proposition for their product or service based on the opportunities present in the market to help them differentiate themselves. Address the following:

3. What differentiates the product or service you are intending to bring into the market? Being in a franchise with a recognizable brand name and support structure in place does have its advantages. However, it is important to identify what distinguishes you from your competitors e.g. cost, quality of service, technology advancement, brand name, reputation etc.

4. What are the opportunities and threats present? Identification of the opportunities and threats of the related industry at an early stage is essential because subsequent steps in the process of planning for achievement of the business objective may be derived from there, i.e. what are the market trends, who are the new players in the industry, is there information that points to a potential growth in the market, etc.

If the franchise you’re buying already has a presence in other markets, it would be helpful to leverage on what other franchisees are doing and look at how their strategies may be applicable to yours. The list of issues to look at it is by no means exhaustive. A small detail can make or break your business plan. Sometimes, franchisees source for alternative resources on their own to make their businesses more efficient. For example, the franchisee of a restaurant may have found a cheaper alternative to purchase chickens of a similar quality. The franchisee may then approach the franchisor and propose this cheaper alternative to them. If the franchisor approves, the franchisee would then be able to reduce the cost and logistics of purchasing chickens from the franchisors’ headquarters there on. The point is to be as extensive as you can in your research and sieve out every detail that may affect your business. A wrong decision takes a few seconds to make, and for some, a lifetime to put right.

Updated Research for Continuous Success

Market research doesn’t stop after you bring the product or service successfully into your local market. Continuous research is needed to provide you with timely information on changing industry trends and consumer perceptions. Collaborate with your franchisor to see what can be done to ensure the product or service is up to date and to maintain its competitive edge in the market. Alternatively, engage an external consultant to provide in-depth information on the existing distribution networks, buying habits of consumers, market potential, etc. Particularly if you are venturing into a market which is not your local market, it would be beneficial to hire a local consultant to provide you with insights. If you have not been “listening” sufficiently to your market, it is still not too late in the day to review your strategy and invest in a thorough research to protect your business and plan for its long-term growth.

Being the foremost to be in the know will be the key to your success.

Flora ManFlora Man is a Research Analyst within the Marketing and Strategic Advisory Division of BDO Consultants Pte Ltd. Her specializations include market intelligence and research, internationalization and market feasibility studies.

Flora can be contacted at Tel: +65 6828

9118 or email at floraman@bdo.com.sg. For

more information, visit www.bdo.com.sg

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