Where should American purveyors of salty pretzels, sweet treats and fried chicken look for new customers?
Sometimes in the very countries that seem the most unlikely based on news headlines and economic data, said international franchising expert Bachir Mihoubi, whose FranCounsel Group LLC helps U.S. brands crack new markets.
Over the years, developing countries have proven to be fertile franchising ground, partly because their franchisees are often ambitious entrepreneurs who see value in American brands.
U.S. brands tend to carry weight even in regions like the Middle East, where many consumers can divorce their political views from their desire for a tasty cinnamon roll.
“A consumer actually chooses an American brand over a local brand when it comes to having a meal or drinking coffee, but when you ask that same consumer what they think about the U.S. foreign policy they have a completely different attitude,” said Mr. Mihoubi, who introduced Cinnabon to Egypt and Caribou Coffee to Turkey while working for Atlanta-based AFC Enterprises years ago.
It’s not vital that everyone in a country be able to afford your products, he said. It’s more important to have a strong initial base of customers with prospects for long-term growth.
That’s one reason saturated markets like Western Europe don’t always make sense for American brands. Another is that compliance costs and labor regulations in developed markets are usually tougher. While the big boys like McDonald’s and KFC often enter markets with their own cash, smaller franchisers mostly work with local partners and need to keep costs down.
While presenting major advantages, international markets are also littered with potential pitfalls, both legally and culturally.
Franchisers often fail to register their trademarks in markets where they want to expand, only to find pirates squatting on their name when they get there.
The names themselves can present problems, too. Atlanta-based Church’s Chicken, for example, had to change its name to Texas Chicken in Muslim countries. Even though Church is a surname in this case, Muslims might have misinterpreted it as a Christian symbol.
“You have to be culturally sensitive to where you’re going. You have to translate culturally your trademarks and your name to make sure that it does not offend the local culture, and you have to be flexible,” said Mr. Mihoubi, who also sits on the board of Mr. Pretzels, a fast-growing pretzel chain.
Why look abroad?
With all these challenges, why should companies look abroad in the first place, especially if they’re doing well in the U.S.?
For one, it’s a matter of diversification. As the U.S. government says in its relentless export promotion efforts, 95 percent of the world’s consumers are outside the United States.
“During the crisis we’ve had recently, you do not want to depend solely on a local market; you want to depend on 50 instead of just one country,” Mr. Mihoubi said.
But which markets?
Mr. Mihoubi says to stay away from Western Europe and instead look at dynamic regions like the Middle East, Eastern Europe, Asia and Latin America.
“The facts have shown over the years that American brands have done much better in developing countries,” he said.
An Algeria native who speaks fluent Arabic, French and English, Mr. Mihoubi has been named an expert in residence on franchising for the U.S. Department of Commerce, helping countries like Tunisia formulate their franchising regulations.
For more information, visit http://www.francounselgroup.com.