are you prepared for international franchising?
TRANSCRIPT
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Are You Prepared for International
Franchising?
Phi Nguyen International Franchise Summit 2015
Kuala Lumpur March 2015
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Are you ready to franchise? 1. Proven Business Model 2. Uniqueness of products / services 3. Brand 4. Easily duplicated 5. Easily learned 6. Franchising support structure & culture
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Are You Ready?
Growth
vs. Survival Strategy
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Why International?
Ø Network Growth
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0%# 20%# 40%# 60%# 80%# 100%#
McDonald's#
Yum!#Brands#
Doctor's#Associates#
Seven#&#I#Holdings#
Burger#King#Worldwide#
Starbucks#Corp#
The#Wendy's#Co#
Dunkin'#Brands#
Darden#Restaurants#
Domino's#Pizza#Inc#
Franchise#and#CompanyQowned#Outlets#at#10#Leading#Operators#2013#
CompanyQOwned#Outlets# Franchised#or#Licensed#Outlets#
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6
KEY FACTS AND FIGURESW H Y A S E A N M A T T E R S T O U SASEAN policy to form an Economic Community with free movement of goods, services, labour and capital by 2015
ASEAN FDI inflows overtook China in
2013
2020
2018
4
US$4
5.6% 5
TRILLION
LARGESTEXPORTER
timeslarger
by (roughly that of Germany in 2013)
of the world’spopulation
LARGEST ECONOMY
Asean’s economy could exceed
and nearly
2030
%
5th
by
Home to nearly
Will rank as
Annual average growth of
for the N E X T YEARS
More than double the USA, triple that of the EU
the region’s labour force will expand
EXPONENTIALLY
(adding 28m new workers).
Demographics are positive and hugely advantageous to growth – young labour force.
AND
BY
Between
2014
3rd
1.7%2018
Will be the world’s
BY2018ASEAN consumerism
is set to grow
Middle Class
Productivity is creating a giant middle class.
Middle class households
will morethan double
retailers, luxury market, manufacturers, auto industry, IT industry, healthcare, financial services and more
BY 2018 80mTO
Significant opportunities for
BY
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Why International?
Ø Brand & Enterprise Value
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Why International?
Ø Cash-flow
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Why International? Yum! Brands Statement of Income
In millions USD
Revenues 2013 2012 2011 Company sales $11,184 $11,833 $10,893 Franchise and license fees and income
1,900 1,800 1,733 Total revenues 13,084 13,633 12,626
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Why International?
Ø Network Growth
Ø Brand & Enterprise Value
Ø Cash-flow
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What Are You Getting Into? Ø Growth Strategy:
² Opportunities vs. resources
² Roadmap
² Market research
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INDONESIA IN 2030
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What Are You Getting Into?
Ø Business modeling ² Regional & local differences:
ü target consumer profiles & needs ü Buying power ü Consumption occasions…
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What Are You Getting Into?
Ø Business modeling ² Regional & local differences:
ü Product / Service Offerings ü Pricing ü Operations: SOPs, training… ü Design & concept
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• KFC’s India added spicier versions of its chicken, including a Fiery Grill flavor that mimics the red hue and hot spice of traditional tandoori, and Curry Chicken, modeled after popular local curries.
• fried vegetable strips and burger patties made of either potato or vegetables.
• pricing strategy: launched a Streetwise branded menu targeted at students who typically have very little income with items starting as low as Rs25 (US$0.40).
Catering to local palates
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© Euromonitor International 2015
McDonald's: Dominant the World Over, Yet No Two Markets Alike Datagraphic | 01 Nov 2012
The world's number one foodservice chain by some distance, the global McDonald's brand nonetheless conceals a great deal of diversity. Effective localisation has become an increasingly important component of strategy over the last ten years, encompassing everything from locally-relevant menu items to customised formats, like dessert kiosks or the fast-growing McCafe in-store coffee shop addition.
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What Are You Getting Into?
Ø Business modeling ² Financial modeling:
ü Supply Chain ü COGS ü Labor ü Rent ü Operating expenses ü Franchise fee structure ü Profitability
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What Are You Getting Into? Analysis: - COGS - P&L - Cash-flow - Break-even
- ROI
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What Are You Getting Into?
Ø Business modeling ² Growth models:
ü developed vs. developing markets ü Franchise vs. chain ü Develop & Re-franchise ü Partnership
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What about strategic markets such as China?
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What about strategic markets such as the GCC?
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What Are You Getting Into? Ø Business Modeling:
² Regional & local differences ² Financial modeling ² Growth model
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What Are You Getting Into? Ø Franchise support structure & culture
² Marketing ² People & Training ² Operations ² Development ² Legal ² Finance
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What Are You Getting Into?
Ø Partner recruitment & selection Ø Market entry strategy & market
development plan
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What Are You Getting Into? Ø Business Modeling Ø Growth Strategy Ø Franchise support structure & culture Ø Partner recruitment & selection Ø Market entry strategy & market
development plan
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Which Franchise Model?
Master Franchise Agreements, Area Developer Agreements or Unit Franchising? Ø Most commonly used: MFA, ADA
Ø Model selected may be determined by nature brand and development objectives.
Ø Consider different models for different markets depending on geographical, financial or socioeconomic factors.
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There is no substitute for Good Legal Advice relating to:
Ø Franchise Agreements
Ø Marks and Intellectual Property
Ø Company Structure
Ø Franchise Regulations in Your Market
Ø Laws & Franchise Regulations in Prospective Franchise Markets
Important Legal Considerations?
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Avoid These Common Pitfalls
Ø Stick to your development plan Ø Never compromise on your vision and values.
Ø Choose your franchise partners carefully
Ø Don’t assume your franchise partners know how to manage a multi-unit franchise business.
Ø Ask for explanations and justifications before modifying your systems
and standards.
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Thank you & wishing you every success
with your international expansion!
Phi Nguyen [email protected]