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Global Franchise Expansion – Any Hidden Intentions?

Franchises aiming for global expansion could mean two things: It is either they are booming or they are looking for overseas market, due to stagnant or declining local market.

Krispy Kreme irony

Krispy Kreme irony

Let us start with McDonald’s as an example.

We all know that McDonald’s franchise units are present in many parts of the world (#1 in 2009 top 100 global franchise lists.) They have achieved what Subway and 7-Eleven can’t. Despite challenges McDonald’s face in the countries they existed, such as a victim of terrorist attack (for being an ‘American’ business) and protests from many parts of the world, they do thrive.

Unfortunately, not all global expansion cases are like that of McDonald’s. Let us take Krispy Kreme, as an example in the fast food niche.

How Krispy Kreme different from McDonald’s, operating in the same fast food category

Some management problems and a growing trend of healthy food, among other problems, are lingering problems to Krispy Kreme, causing some franchisees to go out of business and a drop in stock prices (Krispy Kreme went public in 2000.) It is picking up the pieces with the new management (and a continuing global expansion,) but the outlook is still full of “unknowns” and “maybes” (please read this Yahoo! Finance article about Krispy Kreme.)

The US might view Krispy Kreme as “tradition”, but in some part of the world where franchising is booming and thriving in recession, Krispy Kreme means a different thing.

Global franchising case study: Indonesia, South East Asia

Let’s take Indonesia as an example – a promising land for both local and global franchises. Indonesia, through the master franchisees, has attracted the large franchises, such as McDonald’s, KFC, Circle K, ActionCoach, including Krispy Kreme (coming up… WSI Internet Consulting – #1 in category in the US.)

In Indonesia, Krispy Kreme shouts “delicious junk food.” And yes, in Indonesia, junk food is still preferred over the healthier counterparts – A major reason why Krispy Kreme is a success and Burger King is successful in making its comeback (We haven’t seen any worth noted movements from Subway, though) – both to accompany the two most established and successful fast food franchises in Indonesia, McDonald’s (figures…) and KFC. Coincidentally, most fast food franchises in Indonesia provide not-really-healthy food choices, and they do thrive.

What all of the above signify?

When looking into an international franchise opportunity, especially if you are an overseas franchisee candidate, you must find out the background story of the franchise business – Why it is expanding to your country? Is it because the rapid growth or is it because the problems faced in its home country?

In other words, will you receive the full support from a solid franchise with strong management team, not from an ailing franchise?

Again, the “DD” words – due diligence – plays an important role.

Would you care to share your ‘two cents’? If so, please let us know your opinion on this article.

Ivan Widjaya
Global franchises boom… and bust
Image by Kai Hendry.

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