Bill Hunt has over 25 years experience in international franchise sales. He is past president of Century 21 China and is currently a Keller Williams Worldwide Consultant. This interview focuses on the major mistakes a franchisor faces when taking their business global.
SBT: Bill, it’s great that you could take some time today, and I wanted to ask you a question. Many franchise owners think that they can take the way that they’re doing business in the United States and just transfer that template to the country that they’re entering. Is that true?
Bill Hunt: Well they certainly think that they can do that, but from my experience there’s just a lot more to it. What I’ve found is that the successful North American franchisors have built great business models and growth and support strategies for the USA & Canadian markets that can be duplicated over and over, which of course is the key to building a powerful franchise network.
What they fail to recognize is that throughout North America we mostly speak English and we have the same culture and lifestyles combined with one of the world’s highest standards of living. That doesn’t necessarily translate to the economics and cultures in other countries where the cost of living and disposable income is dramatically lower and social customs are vastly different from ours. Their western franchise concept of a “brand in a box” needs to be adapted and modified, and localized to fit into an entirely different social and business culture.
SBT: When they’re adapting or localizing their existing franchise, what’s the biggest challenge that they’re going to face when they’re considering going global with their business?
Bill Hunt: I have found that the greatest challenge foreign franchisors face is to recruit the most qualified leaders and support executives from their own country who have the influence and leadership experience in the industry that will be franchised and who will follow a proven business model. Once this executive team understands the basics of franchising and have completed the localization and adaptations for their particular markets they must completely follow their franchise models. That’s one of the keys to success in franchising; follow the model.
As entrepreneurial leaders they will always have the idea that “their market is different” and that “the model won’t work here” so they must resist the temptation to change the core elements of the new franchise. They want to change the McDonald’s arches from gold to purple or in the case of Keller Williams Realty International open market centers that are the same size as the local competition rather than 4-5 times larger which is the KW model. When the overseas master franchisor begins to fail in their first year or two of operation they blame the model and fail to look inward at their own failure as leaders who ignored proven models and failed to listen to the support team from the North American Franchisor.
SBT: When you give the example they want to change the arches color, do you find then that a lot of those people still want to do it their way even though they’re saying they want to buy into a franchise?
Bill Hunt: Well exactly. One of the elements of franchising is that we look for individuals with a great entrepreneurial background who have been successful because of their hard driving personality and determination to succeed at all costs. However, this is a double edged sword. This driving ego and ambition can also blind the entrepreneur to outside ideas. They believe their success is strictly because of them and that only they know their market so they won’t follow proven models that a successful franchisor has developed over many years of trial and error.
SBT: Bill, let’s say you’ve got a North American franchisor who is considering going global, what are the two or three most common pitfalls for them?
Bill Hunt: When they decide to take their franchise global oftentimes their motivation is solely to generate millions of dollars from the initial upfront licensing fees and they sell to the first group with the money without conducting a full due diligence on the capabilities of their new partners. They do the deal and they think that’s all they have to do, but they’ve got to make sure that in addition to somebody having the investment capability, that they also have the leadership and the management to be successful in that country. A lot of people have the money, but not a lot of people have the money and the skills. That’s the biggest pitfall. They must find the right people.
In every country there are wealthy people who want a foreign brand just for their ego. I have seen “brand collectors” in many countries. They own many franchises and none of them perform well and they just keep pumping in money to sustain them and their egos. Ultimately the Parent Franchisor has to terminate the franchise which damages the brand for years to come in that country since it is viewed by others as a failure. The master franchise in North America has to have a very comprehensive and accurate recruit select process and an intensive due diligence to ensure the correct partners from day one.
Secondly, once the franchise sale is concluded the North American Franchisor oftentimes fails in overseeing their new partner’s launch process and their delivery of ongoing support for their new foreign partner and that foreign partner’s new franchisees.
From my experience I have seen a master franchisor in North America conclude the franchise transaction and then after a one week orientation class in their corporate offices ship all of their intellectual properties, technology platforms, operations and training manuals to their new overseas franchisee’s office. They wish them well and tell them “it is now up to you; you bought the franchise.” The most successful master franchisors will have onsite support on a regular basis and some will provide a consultant from the corporate headquarters to live onsite for the first four to six months or a year, to make sure that they adapt and that they localize the key ingredients, the key business models for that local country.
SBT: Could you give an example of a successful company that’s done it this way?
Bill Hunt: There are lots of successful stories when we look at somebody like a Starbucks or in the fast food industry like Subway. In my experience, one of our greatest successes is when we launched the Century 21 master franchise in Venezuela. In Venezuela we had found the right people because in fact, they were pirating the brand illegally, they had already opened it up they liked it so much. Rather than litigate against them for piracy, we said, “If you like it so much, why don’t you be our partner?” We knew we had a strong leadership group of five people in Caracas, Venezuela, and because they knew the marketplace they followed our advice and found the right location and had it decorated according to our policies and procedures from day one.
I had a very experienced consultant from Century 21 Virginia, who moved to Caracas for six months. That person because of his experience was able to very quickly assist them to adapt, localize, and translate, all of the various training materials, business models, and technology platforms. We held the master accountable with the Monday morning meeting where our consultant gave them their marching orders based on a three hundred item Gantt chart of all the activities they needed to do to launch, and during the week he monitored that.
On Friday they held a recap meeting with all of their team; there were six of them. What have they done right and wrong, and what did they need to do? After that meeting he sent us an executive summary. On the weekend we gave them our corporate input; Monday they had a fresh start again. We did that over a four and a half month period, and we opened twenty-four franchised offices in Caracas.
Overnight it was the largest real estate company in South America and we did it in four and a half months. It was the combination of just what I was speaking. We had the right team in place with the right intelligence and ability, and local market knowledge, coupled with strong support from corporate, and total accountability to keep them on track.
SBT: It was a very detailed map to follow it sounds like…
Bill Hunt: Absolutely. A road map step by step with each individual activity and person that was responsible for each activity, with the time frame to complete it. If they failed to meet their deadline then we kept that activity open until it was completed correctly. We monitored their activities so nothing slipped between the cracks.
SBT: Bill, to wrap this up, why would working with an international franchise consultant improve their chances for success? I mean you’ve kind of answered finding the people. Maybe that’s where this question comes in, is you must find the right people.
Bill Hunt: Well, I believe that business consultants are a dime a dozen. Anybody looking to hire specifically a franchise consultant would want to be careful in their due diligence, and they would want to find somebody that has the experience gained from being on the ground, and has learned from their many mistakes. They know step by step what needs to happen, when it has to happen, how it’s going to happen, and can lead them through the complete launch phase into the launch itself.
Here’s the other mistake that a lot of franchise owners make. They think that, ‘Okay I’ve launched it, I made the sale, and I’ve sold some franchises. Now I can sit back and collect my royalty fees.’ However, that’s really just phase one. The real work comes with supporting their franchisees to make sure they do the same thing. That they also follow the model, that they do the step by step launch themselves and that they provide great customer service for their clients.
A good franchise consultant knows that the franchise sale is just the beginning. That it’s the ongoing support that is vital to create an army of happy franchisees in their country that’s going to result in success. Good franchise consultants will have that experience from helping find the right franchise partner in a country, to helping them launch it, and then helping them maintain a healthy and growing base of franchisees within the country.
SBT: Bill thanks so much for your insights into what would make a successful international franchise.
Bill Hunt: It’s been my pleasure.