Leveraging IP Assets to Enter Foreign Markets

1
Leveraging IP Assets to Enter Foreign Markets

• Transaction franchise company example

2
International Expansion

• franchising is an international activity
• more than 400 U.S. franchise companies
• operating in foreign markets
• adds revenue sources and grows markets
• KFC - U.S. vs. China
• reduces dependence on home market
• leverages existing IP, know-how, technology
• no longer exclusively an American export
• 2 key issues (below)

3
When to Enter Foreign Markets (1st Issue)

• sufficient maturity of franchise system
• U.S. franchisor had 137 domestic outlets
• tweak the business model (below)
• selecting foreign business partners
• selecting the right target countries
• TSS Photography - South Africa (late 80s)
• McCafe - tested in U.S. 2001 33 countries
• the market leader in Germany (306 coffee shops)
• transfer of PBS to foreign partners
• 1 trigger inquiry from a foreign market

4
Tweaking The Business Model for Foreign Markets
(2nd )

• modifying domestic expansion strategy
• master franchising paradigm
• removes burden of foreign market operations
• and selecting the right foreign franchisees
• master franchising risks (McDonalds)
• one-time fee 100,000 - 1,000,000 or more
• master franchisor split FFs and royalties
• master becomes a clone of the franchisor

5
Tweaking The Business Model for Foreign Markets
(Contd )

• tweaking dual distribution strategies
• tweaking the level of control
• tweaking the training program
• tweaking operations manuals
• tweaking sources of supply, etc
• developing the legal documents
• strategies to reduce master franchising risk
• increase up front fees
• lower ongoing royalty fees
• gt 2,000 master franchisees worldwide

6
Preliminary Research Steps

• research business, cultural and political
• research cost ease of doing business
• research competitors in each target country
• research the market in each target country
• protect the IP (mark) in target countries
• develop a profile of the master franchisee
• research legal compliance in target countries
• provide support, know-how services?

7
International Marketing Steps

• add a page to existing Web site
• process master franchisee leads
• network with international systems (IFA)
• attend international franchise shows (SG)
• advertise in international publications
• hold candidates to a structured process
• Discovery Day

8
The Big Franchise Players
Company International U.S. outlets Company owned
7-Eleven 25,062 5,579 1,039
McDonalds 10,946 11,608 8,269
KFC 6,089 4,277 3,067
Subway 5,932 20,265 0
Curves 2,005 7,875 2
9

• 4,000 Best Western hotels in 80 countries
• 2,000 North America
• 2001 6 hotels in Asia
• 2007 106 in Asia
• - 17 more in China, Japan, Indonesia,
  Thailand
• 2010 200 (projected) in Asia

10
Howards Storage World (Australia)
11
Howards Chronology

• 1977 first retail store in Australia
• 1998 began franchising in Australia
• 2004 chain of 35 outlets
• master franchised West So. Australia
• used the master model for international
• 2004 1st master franchise in Singapore
• - master must own operate a Howards store
• - master subfranchises all training in Australia
• - Howards revenue MFF royalty ( split)
• 2005 2nd in New Zealand

12
Howards (continued)

• 2005 3rd in Spain
• 2005 4th in the Middle East
• 2007 5th in Ireland
• 2007 6th in the Philippines
• Howards International 14 stores
• about 20 of sales
• changes to business model 10
• - supply logistics
• now 62 stores open in Australia