Are You Prepared for International

Franchising?

Phi Nguyen International Franchise Summit 2015

Kuala Lumpur March 2015

Are you ready to franchise? 1.  Proven Business Model 2.  Uniqueness of products / services 3.  Brand 4.  Easily duplicated 5.  Easily learned 6.  Franchising support structure & culture

Are You Ready?

Growth

vs. Survival Strategy

Why International?

Ø Network Growth

0%# 20%# 40%# 60%# 80%# 100%#

McDonald's#

Yum!#Brands#

Doctor's#Associates#

Seven#&#I#Holdings#

Burger#King#Worldwide#

Starbucks#Corp#

The#Wendy's#Co#

Dunkin'#Brands#

Darden#Restaurants#

Domino's#Pizza#Inc#

Franchise#and#CompanyQowned#Outlets#at#10#Leading#Operators#2013#

CompanyQOwned#Outlets# Franchised#or#Licensed#Outlets#

6

KEY FACTS AND FIGURESW H Y A S E A N M A T T E R S T O U SASEAN policy to form an Economic Community with free movement of goods, services, labour and capital by 2015

ASEAN FDI inflows overtook China in

2013

2020

2018

4

US$4

5.6% 5

TRILLION

LARGESTEXPORTER

timeslarger

by (roughly that of Germany in 2013)

of the world’spopulation

LARGEST ECONOMY

Asean’s economy could exceed

and nearly

2030

%

5th

by

Home to nearly

Will rank as

Annual average growth of

for the N E X T YEARS

More than double the USA, triple that of the EU

the region’s labour force will expand

EXPONENTIALLY

(adding 28m new workers).

Demographics are positive and hugely advantageous to growth – young labour force.

AND

BY

Between

2014

3rd

1.7%2018

Will be the world’s

BY2018ASEAN consumerism

is set to grow

Middle Class

Productivity is creating a giant middle class.

Middle class households

will morethan double

retailers, luxury market, manufacturers, auto industry, IT industry, healthcare, financial services and more

BY 2018 80mTO

Significant opportunities for

BY

Why International?

Ø Brand & Enterprise Value

Why International?

Ø Cash-flow

Why International? Yum! Brands Statement of Income

In millions USD

Revenues        2013    2012    2011    Company  sales      $11,184    $11,833    $10,893    Franchise  and  license  fees  and  income    

       1,900    1,800    1,733    Total  revenues      13,084    13,633    12,626    

Why International?

Ø Network Growth

Ø Brand & Enterprise Value

Ø Cash-flow

What Are You Getting Into? Ø Growth Strategy:

² Opportunities vs. resources

² Roadmap

² Market research

INDONESIA  IN  2030  

What Are You Getting Into?

Ø  Business modeling ² Regional & local differences:

ü  target consumer profiles & needs ü Buying power ü Consumption occasions…

What Are You Getting Into?

Ø  Business modeling ² Regional & local differences:

ü Product / Service Offerings ü Pricing ü Operations: SOPs, training… ü Design & concept

•  KFC’s India added spicier versions of its chicken, including a Fiery Grill flavor that mimics the red hue and hot spice of traditional tandoori, and Curry Chicken, modeled after popular local curries.

•  fried vegetable strips and burger patties made of either potato or vegetables.

•  pricing strategy: launched a Streetwise branded menu targeted at students who typically have very little income with items starting as low as Rs25 (US$0.40).

Catering to local palates

© Euromonitor International 2015

McDonald's: Dominant the World Over, Yet No Two Markets Alike Datagraphic | 01 Nov 2012

The world's number one foodservice chain by some distance, the global McDonald's brand nonetheless conceals a great deal of diversity. Effective localisation has become an increasingly important component of strategy over the last ten years, encompassing everything from locally-relevant menu items to customised formats, like dessert kiosks or the fast-growing McCafe in-store coffee shop addition.

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What Are You Getting Into?

Ø Business modeling ² Financial modeling:

ü Supply Chain ü COGS ü Labor ü Rent ü Operating expenses ü Franchise fee structure ü Profitability

What Are You Getting Into? Analysis: -  COGS -  P&L - Cash-flow - Break-even

- ROI

What Are You Getting Into?

Ø Business modeling ² Growth models:

ü developed vs. developing markets ü Franchise vs. chain ü Develop & Re-franchise ü Partnership

What about strategic markets such as China?

What about strategic markets such as the GCC?

What Are You Getting Into? Ø Business Modeling:

² Regional & local differences ² Financial modeling ² Growth model

What Are You Getting Into? Ø  Franchise support structure & culture

²  Marketing ²  People & Training ²  Operations ²  Development ²  Legal ²  Finance

What Are You Getting Into?

Ø Partner recruitment & selection Ø Market entry strategy & market

development plan

What Are You Getting Into? Ø Business Modeling Ø Growth Strategy Ø Franchise support structure & culture Ø Partner recruitment & selection Ø Market entry strategy & market

development plan

Which Franchise Model?

Master Franchise Agreements, Area Developer Agreements or Unit Franchising? Ø  Most commonly used: MFA, ADA

Ø  Model selected may be determined by nature brand and development objectives.

Ø  Consider different models for different markets depending on geographical, financial or socioeconomic factors.

There is no substitute for Good Legal Advice relating to:

Ø  Franchise Agreements

Ø  Marks and Intellectual Property

Ø  Company Structure

Ø  Franchise Regulations in Your Market

Ø  Laws & Franchise Regulations in Prospective Franchise Markets

 

Important Legal Considerations?

Avoid These Common Pitfalls

Ø  Stick to your development plan Ø  Never compromise on your vision and values.

Ø  Choose your franchise partners carefully

Ø  Don’t assume your franchise partners know how to manage a multi-unit franchise business.

Ø  Ask for explanations and justifications before modifying your systems

and standards.

Thank you & wishing you every success

with your international expansion!

Phi Nguyen phi@worldfranchiseassociates.com