Franchising

We went to the experts and those who have done it to learn what it takes to move a franchise concept from country to country. In this issue we speak with Joe Lindenmayer from TSS Photography and Craig Slavin from Franchise Architects to get their views on international franchising.

Georgia franchise goes down under

TSS Photography (formerly The Sport Section) is a franchise based in Georgia. It has been operating since 1983 and now has 222 units. Most of the franchisees are in the U.S., but the company has moved into New Zealand, Australia, and Canada. When asked to describe what TSS Photography does, President Joe Lindenmayer says, "We are the 'picture day' people." Franchisees provide individual, team, and class photos through sports organizations, schools, civic clubs, YMCAs, Boys and Girls Clubs, and PTAs. In many cases the photos are used as a fundraiser for the organization.

TSS Photography's first foray into the international arena turned out to be a case of bad timing. Lindenmayer explains, "We opened a franchise in South Africa back in the late '80s and early '90s. If you remember what happened politically and socio-economically in South Africa at that time, you can understand that it was a very difficult environment for our initial international move. It was hard getting the money out and doing any sort of commerce, so after a couple of years we both agreed that it just wasn't going to work."

The company continued to receive interest in expanding overseas. "We believe in core competencies. That's one of the things that have made us so successful over the years. We do what we do well and once we felt we had that under control in the U.S., then we expanded our reach internationally," asserts Lindenmayer. Although Lindenmayer liked the prospects of going into the UK first, the next opportunity was much farther away. "We were approached by a gentleman in Wellington, New Zealand, who found us on the Internet. We began discussions with him about bringing TSS into New Zealand and Australia in the early months of 2003. They've really got such a hold of franchising down there and we saw many brands going in that it made a lot of sense for us."

It isn't enough to speak the language

Even though TSS is in 4 English speaking countries, Lindenmayer points out that there are still differences to be aware of. "Every English speaking country has its own culture. And that's one of the big lessons that, frankly, we continue to learn. Australia and New Zealand are wonderful countries and the people are terrific, but it's not the States. They have a different perspective on products. We held focus groups in New Zealand and in Sydney and Melbourne. But while there was a lot of excitement, the focus group only represents the people in the focus group. When you get beyond that scope, you'll see some changes."

Lindenmayer says there are other challenges, such as technology. "It's the little things that you don't think of. Take date formatting, for example. We go by day and month whereas they might go by month, then day. And then there are the logistics of working with any country. Regardless of the number of time zones away, you are dealing with basically a whole day away. We had to work around those challenges by keeping some staff later and making some technology improvements that would help communication. We are also dealing with things like customs and border issues that increase freight and the cost of doing business. One of our goals is to have a lab in each country (currently photos are processing centrally in the U.S. and shipped to franchisees for distribution). We are working on that with NZ currently. The planned launch for a lab, which we are calling TSS Down Under, is March of 06. As you can imagine in a post-9/11 world, international exchange of orders and goods can be a bit of a challenge. But we've done pretty well to work through it together with our master franchisees," states Lindenmayer.

International franchising provides more benefits than just money

Lindenmayer thinks the best part of international franchising is the sharing of experiences.He says, "Even though we are a franchisor with 20+ years of experience, we have learned much. For example, there is potential to market different products and offer different services. And I think franchisees from different countries can add to the culture of the franchise company since they are essentially part of your headquarters operation. There is a neat exchange all around. If you really look at that as an opportunity to learn and have that individual or group of owners contribute to your franchise headquarters, there is synergistic value for you there."

"Overall, international franchising has been a great experience," says Lindenmayer. "My philosophy is, every mistake is an investment in progress. If there's a problem, we isolate it and get it fixed while marginalizing the damages. If you are dynamic enough to try different things, I would strongly recommend it for a franchise company that feels like they're ready. From my experience I would say, don't focus on the master franchise for your revenue. In franchising, it shouldn't be about the franchise fee and when you are going international, it shouldn't be about the master fee."

Contact Information: Joe Lindenmayer, President, TSS Photography, http://www.TSSphotography.com, (678)740-0880.

Management consulting firm helps clients move into foreign markets Since 1980, Chicago-based Franchise Architects has been designing effective and innovative expansion programs for franchises here and abroad. The firm's success stories include the Disney stores and Mrs. Fields here in the U.S. and Tazaj, the largest fast food chain in the Middle East - created from scratch. Chairman Craig Slavin believes that expanding into international markets is a great wealth building strategy. But he warns that franchises should not rush to jump the borders. "I'm always reading press releases about companies that have 3 or 4 locations in the U.S. and now they are seeking international opportunities. I believe that's incorrect because a lot of these companies lack the human resources, the capital, and the time it takes to service franchisees outside of their core market," says Slavin.

Slavin says that before going international, a company needs to first demonstrate its ability to penetrate markets domestically. "The goal of franchising is not to sell franchises; it is maximum market penetration," explains Slavin. Ideally if they've done it in multiple markets, that shows they have the ability to transfer the concept from one market to another. Once market penetration has occurred and the results are positive, then I think a company can consider franchising internationally."

Country selection is critical

When the time is right, Slavin says there are two important steps to consider. The first is to choose a country that makes the most sense in terms of opportunity for the particular product or service. "Picking the countries is absolutely critical," insists Slavin. The receiving country must have either an existent or an emerging middle class. Most franchise businesses are geared for the masses, not the elite. You need to have the masses owning and operating it and generating the business."

The second important thing is to choose the foreign partner. Slavin believes utilizing master franchises is the most effective way to move into other countries. "The franchise should have a company or an individual take on the responsibility in each country to grow and expand the concept as it was done domestically in the U.S." He points out that the selection of a master franchise should be given careful consideration. "You need a master franchisee that shares the core values of what the company represents and has the financial wherewithal to build out the market. They also must have the human resources that it takes to either staff the locations or find franchisees in those particular markets. If you have the right people, you can work with more of them simultaneously. That means you could have all of these growth engines operating simultaneously all over the world," says Slavin.

Expanding into international markets is a big undertaking and there are pitfalls to watch for. Slavin says, "If it's not done right, it could be the worst monster you've ever seen because internationally we are not talking about a one-hour or two-hour plane ride. We're talking typically, in cases outside of North America, a day of travel to get there, a day of travel to get back, and then a couple of days there." There is also all the necessary legwork that has to be repeated in each new country. "You have to make sure your trademark is protected and understand from a competitive standpoint if there are any similar products or services being offered to consumers," says Slavin. "And one thing to be very careful of is the difference in language. In some cases, a word may mean something in the U.S. and may not represent either a positive message or something you'd be proud of in another country."

Do it right and reap the rewards

Slavin is a proponent of international franchising - if it's done right. He says, "There are benefits if it's done strategically. That would be to pick a particular country in the region of the earth that represents a diving board to other markets. If the model can be replicated in other markets, then all of a sudden you could have a brand growing six or seven different places on the planet at the same time. Plus, it's a great opportunity to learn because you're in the process of adapting to different markets and different cultures."

Contact Information: Craig Slavin, Chairman, Franchise Architects, http://www.FranchiseArchitects.com, (847)465-3400.