Leveraging IP Assets to Enter Foreign Markets Transaction franchise company example

International Expansion franchising is an international activity more than 400 U.S. franchise companies –operating in foreign markets adds revenue sources and grows markets –KFC - U.S. vs. China reduces dependence on home market leverages existing IP, know-how, technology no longer exclusively an American export 2 key issues (below)

When to Enter Foreign Markets (1st Issue) sufficient maturity of franchise system U.S. franchisor had 137 domestic outlets tweak the business model (below) selecting foreign business partners selecting the right target countries –TSS Photography - South Africa (late 80s) –McCafe - tested in U.S. 2001: 33 countries the market leader in Germany (306 coffee shops) transfer of PBS to foreign partners #1 trigger – inquiry from a foreign market

Tweaking The Business Model for Foreign Markets (2nd ) modifying domestic expansion strategy master franchising paradigm removes burden of foreign market operations and selecting the right foreign franchisees master franchising risks (McDonalds) one-time fee: $100,000 - $1,000,000 or more master & franchisor split FFs and royalties master becomes a clone of the franchisor

Tweaking The Business Model for Foreign Markets (Contd ) tweaking dual distribution strategies tweaking the level of control tweaking the training program tweaking operations manuals tweaking sources of supply, etc developing the legal documents strategies to reduce master franchising risk: increase up front fees lower ongoing royalty fees > 2,000 master franchisees worldwide

Preliminary Research & Steps research business, cultural and political research cost & ease of doing business research competitors in each target country research the market in each target country protect the IP (mark) in target countries develop a profile of the master franchisee research legal compliance in target countries provide support, know-how & services?

International Marketing Steps add a page to existing Web site process master franchisee leads network with international systems (IFA) attend international franchise shows (SG) advertise in international publications hold candidates to a structured process Discovery Day

The Big Franchise Players CompanyInternationalU.S. outletsCompany owned 7-Eleven25,0625,5791,039 McDonalds10,94611,6088,269 KFC6,0894,2773,067 Subway5,93220,2650 Curves2,0057,8752

4,000 Best Western hotels in 80 countries 2,000 North America 2001: 6 hotels in Asia 2007: 106 in Asia - 17 more in China, Japan, Indonesia, Thailand 2010: 200 (projected) in Asia

Howards Storage World (Australia)

Howards Chronology 1977: first retail store in Australia 1998: began franchising in Australia 2004: chain of 35 outlets -master franchised West & So. Australia -used the master model for international 2004: 1 st master franchise in Singapore - master must own & operate a Howards store -master subfranchises; all training in Australia - Howards revenue: MFF + royalty (% split) 2005: 2 nd in New Zealand

Howards (continued) 2005: 3 rd in Spain 2005: 4 th in the Middle East 2007: 5 th in Ireland 2007: 6 th in the Philippines Howards International: 14 stores about 20% of sales changes to business model = 10% - supply logistics now 62 stores open in Australia