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U.S. franchises

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Franchise Today Radio Interview of Ray Hays

Franchise Today INTERNATIONAL FRANCHISING… Taking your brand global.

Is your franchise concept ready to go international?

What are the pitfalls of launching your international franchise program?

What are the resources and budget requirements to launch a global franchise expansion program?

Join Ray Hays, as he discusses these questions and more with Franchise Today radio hosts Paul Segreto and Joe Caruso. Click here to listen to interview taped October 13, 2011.

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Is Franchising the Last Bastion of American Business Leadership?

By Ray Hays

Blog: www.rayhays.com

 American concepts have historically dominated the franchise sector on a global level. During the late 20th Century, franchising, along with Hollywood, played a pivotal role in the projection of the American culture and brands. We can find McDonald’s from Moscow to Melbourne, Curves fitness centers from Caracas to Cape Town. The domination of American franchises seems all but unstoppable.

 However, a few decades ago, a quiet insurgency emerged in the form of non-U.S. franchise concepts. The manifestation of this rebellion can be seen in four concurrent trends:

 1.       Boom of national “home-grown” franchises outside the U.S. –

  • In Belgium, Mister Minit began franchising in 1964 and became the leading franchise in Belgium, and an early European franchise leader.
  • In Japan, Family Market launched in 1981 in direct competition to 7-Eleven.
  • In Spain, Telepizza launched in 1987 and quickly dominated their national market

2.      International expansion of non-U.S. franchises –

  • In the 1980’s the international expansion of Italian franchisor Benetton made it a household brand in over 100 countries.
  • During the 1990’s India’s NIIT training franchise entered about 40 new countries.
  • In 1998, the Spanish nutrition franchisor Naturhouse began international expansion, quickly entering 18 countries into the 2000’s.

 3.      Entry of foreign franchises into the U.S. –

  • UK-based The Body Shop expanded quickly in the U.S. franchise sector in the 1990s.
  • Established in 2001, Argentina’s ProntoWash car wash franchise quickly entered the U.S. market in 2002.
  • Founded in Australia, Cartridge World entered the U.S. in 2003 and has nearly 600 U.S. franchises today.

4.      Foreign acquisition of U.S. franchise brands –

  • The U.K.’s Bass group acquired the leading U.S. budget hotel brand Holiday Inns in 1988.
  • In 1991, a Japanese franchisee acquired controlling shares of the 7-Eleven parent franchisor.
  • In 2009, French multinational Sodexo acquired the second-largest U.S. senior care franchise, Comfort Keepers.

Despite the foreign franchise insurgency, the U.S. position remains pre-eminent in the franchise sector, at least for now. This U.S. dominance is even seen in the home markets of highly developed European franchise concepts.  According to the website Franchise Europe, of the top 100 franchises represented in Europe (in number of locations), 34 are American-owned franchises. Interestingly, if you compare the top 500 franchises in Europe, only 45, or less than 10%, are American franchises.

This suggests that the U.S. is leading the pack at the top of the European market (about 1000 units or more), but European concepts dominate their markets among the medium and small franchises under 1000 units. Similar trends are seen in other global regions as small international franchises enter the market.

Think about it. Franchising is a unique sector in which U.S. companies continue to dominate on a global scale. U.S. franchises have not given up significant market share to foreign companies, at least compared with the American auto industry, financial sector and increasingly, the IT sector.

In short, the U.S. has maintained its competitive advantage in the franchise sector for more than 50 years. This might be attributed to American innovation or perhaps the marketing power of American brands. However, the advance of the non-American franchise concepts continues.

 What do you think?

  • Can the U.S. maintain its domination of the franchise sector?
  • Will we see more foreign-owned franchises on Main Street America?

My next article will touch on the second question:

What are the facts around foreign franchises entering the U.S. market, and can they succeed on the American franchisors’ home turf?