Growing your restaurant beyond Canada’s borders

International expansion: Growing your restaurant beyond Canada’s bordersBy Chad FinkelsteinNovember 18, 2014
International business expansion: Growing your restaurant beyond Canada’s borders

These days, everyone seems to be asking me the same question about expanding their restaurant businesses – going international. Whether it’s the United States, European countries or Middle Eastern nations, restaurant owners either want to grow beyond Canada’s borders or have been approached by prospects in those foreign countries, thereby opening up a channel of distribution never thought possible.

I think that the appeal of international franchising is guided by one or a combination of the following factors:

  1. the cache and promotional benefits of being able to claim that your franchise concept transcends borders;
  2. a strategic choice based on identified market trends;
  3. favourable economic and regulatory conditions that remove certain barriers to entry for a particular business; and/or
  4. someone from that country expressed an interest in being a franchisee.
That last one, in my view, is rarely, if ever, a good reason to break into a new and uncharted territory. Not to say that this is a wildly impractical guiding force, since so many brands achieve lift-off in new markets and countries when someone who lives there comes calling because they think that concept can thrive. This happens all the time, and there are good operators out there who can identify the right concept in the right place at the right time to make an impact. But I tend to advise my franchisor clients that, whether looking to domestic or international expansion, it’s usually not a good idea to make that choice based on flattery. Just because someone in a market you weren’t looking at calls because they like what you do doesn’t mean it’s time to start licensing your brand to that person.
Potential franchisees out there: don’t let this article discourage you from approaching those franchisors who you think you can work well with – maybe you can. Franchisors out there – enter a new market when you think you’re ready. Franchising takes more effort than most realize. The degree of support that needs to be provided and which franchisees expect can be overwhelming, and it is generally (though not always) easier for an emerging franchisor to be able to lend that support when the geographic distance between head office and franchisee is smaller. Further than that, it helps when you know the market you are servicing.

Going international before you are ready, or broaching a territory that wasn’t necessarily on your immediate radar, presents a few potential risks.

First, if you haven’t already set your sights on that new country, you likely have no idea whether you can even get the trade-mark to operate there. And given how long it takes to obtain trade-mark registration in most jurisdictions, it’s a question you’d want to have answered as early as possible before the franchisee opens a business with your logo branded across the storefront signage.

Second, when you start franchising, you’re no longer in the business of operating that business – you’re in the business of selling and supporting franchises, and your franchisees are in the business of operating that business. If you’re not prepared devote the amount of resources and develop the appropriate infrastructure to support those international franchisees, you’ve probably taken their initial fee for the wrong reason.

Third, unless you have the infrastructure in place to provide regional supervision and support in multiple territories, your visits to and inspections of a franchised business are likely to be less frequent than of those which are geographically closer to you. As a result, you may find that, when you do board a plane for your annual inspection, either brand standards are being considerably deviated from, or the business has been failing at far faster clip than you were aware, either of which only serve to dilute the strength of your brand in that region.

Of course, international franchising presents numerous opportunities, and the road to brand strength and global expansion is populated with plenty of success stories. International franchising may be the logical next move for your system and the next step towards capturing larger market share. Just make sure you’re pursuing it for the right reasons – your reasons.

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Chad Finkelstein
About the author

Chad Finkelstein is a franchise lawyer at Dale & Lessmann LLP in Toronto and can be reached at [email protected] or (416) 369-7883.

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