Are You Prepared For
International Expansion?
Michael Woida
Vice President, International
CKE Restaurants, Inc.
Focus of Today’s Discussion
• What does your organization need to be able
to grow outside of your home market?
• When should you begin international
expansion?
• What strategy should you employ? Direct
Investment, Master Franchising, Area
Development, or Single Location
Franchising?
Reasons to ‘Go Global’
• Increase your franchise’s equity and brand value
• Leverage your existing intellectual property, training,
marketing and support resources
• Exploit new markets for long-term business growth
• Spread risk by diversifying your revenue source
• Generate incremental fees and royalty revenues
• Exploit the opportunity that the global marketplace
offers.
Reasons to ‘Go Global’
• Universal acceptance of franchising
 As a legal and business relationship
 By consumers who value the brand
 By prospective franchisees
• Expanding global economy and rising standards of
living
• International Markets Maturing – Gateway Closing
• Macro-Economic and Political Issues Always Exist Difficult to time markets
• Takes time to build your International Business
• Growth of global/regional/domestic franchise
competitors
What Does An Organization
Need?
What does an organization need?
Strategic Benefit. . .
• Will International expansion augment/accelerate your
organizations’ growth or simply reallocate domestic
resources (and growth opportunities)?
• Is there a market for your concept outside of your
home country? Can your brand flourish?
• Can you leverage your international growth to
enhance your position at home?
What does an organization need?
Organizational Readiness. . .
• Solid Domestic Foundation
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Mission, Vision, Values Well Defined
Positioning, Core Competencies Understood
Profitable Business Model – Strong Unit Level Economics
Track Record Of Success In Home Market
• Executive Management Commitment
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Corporate Mandate
Financial Resources
Human Capital
Realistic Payback Expectations
What does an organization need?
Strategic Plan. . .
• Know where International expansion fits within the
firm’s immediate and long-term activities
• The scope of expansion (where & why) should be
defined (Mature, Contiguous, English, etc..)
• What are the defined measures of success for an
International venture?
When Should You Begin?
When should you begin?
Operational Infrastructure in Place. . .
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Core operating system & support processes
Training systems and materials (i.e., translation)
Marketing platform & systems
Supply Chain/Logistics
Franchise Administration
Legal Systems & Processes Formulated
• Trademarks registered
• Disclosure/License Agreements drafted
What Strategy Should You
Employ?
What Strategy Should You Employ?
• Geographic Expansion Strategy
– Contiguous Markets
– Targeted Regional Markets
– Emerging Markets
• Utilize Market Selection Matrix
– Identify Critical Success Factors
– Assign Weights To Each Factor Based On Your Brand
– Rank Countries By Continent, By Region or Geopolitical
Boundaries
What Strategy Should You Employ?
Market Desirability Matrix
•
Demographic Factors
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•
Age Distribution
Income Distribution
Total Population
Population Growth Rates
Under 30 Population
Urbanization
Education / Literacy
Lifestyle Trends
Economic Factors
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Gross Domestic Product
Purchasing Power Parity
GDP Growth Rates
CPI / WPI
• Cultural Acceptance
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Appeal of Products & Services
Lifestyle Trends
Leisure Activities
Disposal Spending in Segment
Religious / Cultural Norms
Language
• Infrastructure
– Import Barriers
– Local / Regional Supply
Options
– Distribution Issues
– Quality of Telecommunications
– Quality of Road System
– Probability of Natural Disasters
What Strategy Should You Employ?
Market Desirability Matrix
• Unit Economics
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Labor Cost
Real Estate Cost
Cost of Goods Sold
Taxes
Construction Cost
• Other Factors
– Legal Environment
– Franchise Legislation
– Foreign Currency
Stability/Outlook
What Strategy Should You Employ?
Where should you avoid?
• Markets low on your Desirability Index
• Markets where you concept is not applicable
• Markets with restrictive franchise legislation
• Markets with restrictive foreign exchange rules
• Environments that exceed your firm’s risk
tolerance
What Strategy Should You Employ?
(Governance Models)
Wholly Owned
Via a third party
3rd Party Owned
JV Owned
Franchising
Control level
Company
Operated
Direct
Area
Franchising
JV
Operated
Direct
Area
Franchising
Alliance/
License
Master
License
Region
Area
Unit
Examples
CKE US
CKE US /
Mexico
CKE Asia
CKE US /
Mexico /
Middle East
CKE Russia /
Asia
Level Of Brand Control
High
Low
High
Low
High
Low
What Strategy Should You Employ?
Basic Expansion Structures Terminology
• Direct - franchisor acts as franchisor to single unit
franchisees or multi-unit franchisees in the foreign
market.
• Area development - franchisor grants to a local “area
developer” the right to become a single unit franchisee
multiple times, in a defined geographic territory.
• Master - franchisor grants to a local “master franchisee”
the right to subfranchise in the foreign market.
• Area representative - less certain definition - franchisor
grants to a local entity certain rights a new market.
What Strategy Should You Employ?
Basic Expansion Structures Terminology
• Joint venture - franchisor grants to a local entity certain
rights and itself owns some part of the entity together
with a local “partner”.
• Hybrid – various elements of any of the above may be
combined to suit individual needs.
Thank you!!