Expanding into international markets with the franchise model

Far too many retailers are relying on manual processes for their supplier management, critical path control and performance tracking in order to manage an expanding franchise operation – risking both profitability and corporate reputation as a result.

Dominic Potter, UK Managing Director of Momentis Systems highlights the risks facing UK retailers looking to expand abroad and explains the role that a streamlined model can play in enabling highly scalable franchise business operations.

International Marketplace

Franchising is increasingly being seen as a way to de-risk the business model and is gaining growing traction. From Debenhams to the George at ASDA brand, retailers are exploiting the benefits of a lower cost route to market and local knowledge to achieve international expansion.

The model is compelling: no investment in physical assets or long-term rental; access to strong local knowledge and commitment; whilst retaining complete control over the product quality, brand and messaging.

But for many retailers, the franchise vision is yet to be achieved. For some, a lack of confidence and trusted processes has resulted in repeated postponement; for others, ill-conceived strategies have resulted in an unexpectedly high investment in manual effort to manage the complexity of multi-national franchising. As a result, far too many companies are simply not achieving the scale required to achieve both the vision and expected levels of revenue.

Missed Opportunity

Despite globalisation, improvements in communication infrastructure and an increasingly synergistic international marketplace, retailers cannot simply scale up successful domestic retail processes and expect to achieve a seamless, profitable franchise operation.

Entering a new market raises a whole heap of issues and challenges to consider – from ensuring franchisees in a different hemisphere see the right season’s products, to the prohibition of some religious and cultural symbols, as well as a ban on certain types of leather in some countries. Failure to reflect these issues can result in an entire collection being held in customs indefinitely – or franchisees being offered goods that are completely wrong for the market or season.

Retailers need to be able to control the stock that is offered to each store to reflect seasonality, location, and religious/cultural sensibility. However, to be successful and profitable, retailers need to be able to do this without requiring a massive manual effort.

Retaining Control

Rather than taking the time to tailor the catalogue for each franchise, organisations need to streamline the process. By setting attributes for each customer, the catalogue should automatically reflect local sensibilities; each franchisee can log onto a portal and only see a relevant subset of the collection, ensuring inappropriate items, or those that may cause delay at customs, are either not offered or are flagged to the franchisee. Pricing is automatically converted into the relevant local currency; whilst customs documentation is automatically created, further removing an overhead for both franchisor and franchisee.

Taking this approach not only radically reduces the manual effort associated with managing the requirements of each franchisee but also eliminates the risk of inappropriate products being dispatched, customs delays or financial confusion. In addition, the portal approach enables the retailer to have far greater visibility over the franchisee order process – from ensuring franchisees place orders before the Publication closes to proactively addressing potential incomplete orders during the 72 hour window between catalogue closure and placing the final order with a supplier.

A portal ensures franchisees have full visibility of the location of goods in the supply chain at any time, and when they will be delivered. It also eases the process of providing sales figures to the retailer – either direct into the portal or via a spreadsheet that can be uploaded into the system. This in depth insight into local trends in sales performance can be used both to inform on-going international expansion and aid the franchisee in the buying process, exploiting the highly effective tools used by the retailer in the domestic market to improve the relevance of the product mix.

Rapid Expansion

A centralised, portal-based approach to franchisee communication enables retailers to streamline the management of the franchisee network, driving down costs and providing a flexible and scalable platform for rapid expansion.

Creating a transparent system that makes it easy to view the collection, place and track orders, and manage the customs documentation in a single place - with the additional option of accessing the information remotely via a mobile device - plays a key role in building the trusted relationship that is vital to a successful and profitable franchise network.

It is this combination of compelling franchisee offer with highly effective and efficient management of the franchise network that will be key to providing retailers with the confidence to embark upon international expansion and scale up rapidly to realise significant additional revenue.