Taking U.S. Franchises Global

Keeping ahead of the wars, economic meltdowns, and political disasters

One of our jobs for our U.S. clients is to look two to three years ahead, figure out where wars will raging, where economic meltdowns will be occurring, and where political disasters are looming – then take our clients elsewhere!
The key to successful international business is constant monitoring of the economies around the world and being ready to move quickly to higher potential and calmer countries.

Why do we need to do all this? Our company exports U.S. franchise brands.

We act as an outsourced international development department for brands such as Build-A- Bear Workshop®, Denny’s®, International Dairy Queen, Lawry’s® The Prime Rib, Massage Heights®, Everlast Fitness® and Mosquito Squad®. One of our primary tasks is helping the brands prioritize the countries they enter, focusing on countries that have the highest ROI potential for the specific brand.

Recently, the CEO of one of the brands we work with told me that our job was to look two to three years ahead, figure out where the wars will be and take them elsewhere.

It turns out this is just a little bit funny – while at the same time being quite serious.

I would restate this to looking two to three years ahead not only to determine the potential for war, but also the potential for economic meltdowns and political disasters.

This is important due to the fact that it can take two to three years to find and sign a country licensee, and then another one to two years to get the first unit of the franchise open in a country.

How do we do this? Research, research and more research.

We subscribe to 25 international business data and analysis sources. We have team members on the ground in 32 countries. And our US-based executive team collectively has 120 years of international experience living and working in over 69 countries. We have a full time Director of Research who monitors our sources and watches for trends.

That being said, there are still ‘exciting’ events that change the potential for finding investors in a target country that are ready and willing to make the new investment required to acquire the license of one of our U.S. franchise brands.

Two examples are the recent United Kingdom Brexit vote and the disintegration of Turkey as a place to do business.

No one really thought about what the consequences of actually voting to leave the European Union would be. Now we are beginning to see consequences – and all is not good. Where were the adults when this was happening?

I lived in Turkey in the mid 1980s and it was a great place to reside and to work. It was the world’s only secular, Muslim democracy. Turkey had a female Supreme Court judge before the USA, and a female Prime Minister in the 1990s. Over the past 10 years, things have gradually changed, and now Turkey is no longer secular and it is not really a democracy. The Ottoman Sultan seems to have returned after 100 years. The rapid GDP growth rate is being replaced with the rapid growth of inflation. In recent weeks, inward investment has stopped, and Turkish business people are not making any new investments. Our company has closed our office in Istanbul.

On the other side of the coin is Argentina. For several decades this country has been run by poor governments that defaulted on international loans and paid foreign franchisors their royalties in soy beans. Early in 2016 a new and radically different government came into power. In a matter of a few months they settled the long standing debt problem and made the local currency float free against the dollar. New inward investment is staggering as this first world country with a highly educated population is starved for new products, services and brands. We have started marketing U.S. franchise brands in Argentina for the first time since the mid 1990s. As a local business person told me, “The U.S. dollars have come out of the Argentinean mattresses for the first time in decades.”

At the end of the day we have learned that constant research is key to looking ahead. We have also learned that there will always be surprises. The key to successful international business is constant monitoring of the economies around the world and being ready to move quickly to higher potential and calmer countries.

EGS publishes research projects related to global business development, most notably the GlobalVue™ franchise country ranking, which has been published quarterly since 2001. The latest version of this country ranking tool can be downloaded at the following link: EGS-Dual-GlobalVue-0716.pdf

William Edwards, CEO of Edwards Global Services, Inc., has 40 years of international business experience. He has lived in 7 countries, worked on projects in more than 60, and has advised more than 50 U.S. companies on international development. Contact him at +1 949 375 1896, bedwards@edwardsglobal.com, or read his blog at Geowizard.biz

A version of this blog first appeared In the Fall 2016 edition of the International Executive Resources Group (IERG) Fall 2016 ‘IERG Connect’ newsletter.


The Place of Culture in a Flat World

In April 2005, New York Times columnist Tom Friedman published the iconic book on globalization, “The World Is Flat: A Brief History of the Twenty-First Century”.

The title eludes to the perceptual shift required for countries, companies, and individuals in order to remain competitive in a global market where historical and geographical divisions are becoming increasingly irrelevant.

Per Wikipedia, “Friedman himself is a strong advocate of these changes, calling himself a ‘free-trader’ and a ‘compassionate flatist’, and he criticizes societies that resist these changes. In his opinion, this flattening is a product of a convergence of personal computers with fiber-optic micro cable with the rise of work flow software.”

Many readers, including this author, initially interpreted this as saying that the world is increasingly the same, diversity is going away. A re-reading of Mr. Friedman’s book, and subsequent writings, shows this is not exactly correct. He is proposing that the business world is adopting the same standards worldwide in order to compete with companies in other countries. A strong case can be made for this postulation.

Along comes culture. Dictionary.com defines culture as: “The quality in a person or society that arises from a concern for what is regarded as excellent in arts, letters, manners, scholarly pursuits, etc.; development or improvement of the mind by education or training; and the behaviors and beliefs characteristic of a particular social, ethnic, or age group.”

Businessculture.org says, “Culture illustrates the accepted norms and values and traditional behaviour of a group . . . ‘the way we do things around here.’ The culture of each country has its own beliefs, values and activities. In other words, culture can be defined as an evolving set of collective beliefs, values and attitudes.”

In my experience working in 68 countries over the past 42 years, culture is alive and prospering. In order to do business in other countries, you must be aware of the local culture and how it impacts business to be successful. Flatness is not as important as the culture with which you are dealing. In other words, you must be aware of the diversity in doing business that the local culture represents to be successful in today’s global business environment.

Robert Shaw, a highly experienced and successful global franchise executive based in Orange County, California, has studied the knowledge of local culture as a way to win in business. Mr. Shaw defines three major cultural types that you have to take into account to win in global business:

  • Linear – Aggressive, time is money, task focused, individualistic, the “John Wayne” approach – North America, Australia and Northern Europe
  • Multi-Active – Relationship comes FIRST and BEFORE business, top heavy hierarchy, only meet with decision-makers – Mediterranean, Latin America, Middle East and India
  • Reactive – Relationships first, quiet nodding, listeners, group decisions – Asia (except India.) Nodding simply means they may understand what you are saying. Not that they are agreeing with you.

The aggressive ‘let’s get the deal done and go home’ that US business people often follow leaves no time to develop the relationships that most cultures value and require in order to get business done.

And here are a few cultural “no-no’s” to remember that Mr. Shaw and I have encountered over the years:

  • White flowers as a gift in Japan – white is the color for funerals
  • Showing the bottom of your shoes in the Middle East – dirtiest thing you can do
  • Making the sign for ‘okay’ in Brazil
  • Referring to Taiwan as a country in China
  • Talking politics – sports and local culture are better topics
  • Folding business cards – cards are expressions of who someone is and what they have accomplished

Terri Morrison, in her classic book, “Kiss, Bow and Shake Hands”, shares a few basic but critical cultural differences in doing business in key countries. In regards to meetings:

  • In Brazil, lack of punctuality is a fact of life; be flexible about your counterpart’s (lack of) punctuality
  • In China, punctuality for all appointments is important
  • In India, Indians appreciate punctuality, but do not always practice it themselves!

The bottom line? While business processes may be flattening, cultures are not. To succeed in global business you have to add the cultural factor to your approach to people and companies in other cultures. Ignore the ‘non-flat’ local way of doing business because you think similar business processes are all that counts in a country and you will fail.

Cultures are what make the world an increasingly interesting place!


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