1. Creating the Winning Formula to compete with Global Franchises
Indonesia Franchise Conference(IFC2014)
12-13 September 2014 Jakarta Indonesia
Presented by Dr.Peerapong K.
Business Coach and Consulting Co.,ltd.

2. Background
Franchising refers to an agreement under which a parent company (the franchisors) grants an individual or another company (the franchisee) the right (the franchise) to do compensation called management fees.
The franchise includes the right to:
- sell the franchisor’s product & intellectual property,
- use its name, trademark and service,
- adopt its business and technical methods,
- copy its symbol or architectural methods,
- use it procedural system etc.

3. Foundation for Successful Franchisors
Documented
and effective
Business Model
and System
Strong Brand
Dedicated and
Strong network
of Franchisees
Leadership Ability
Franchise
System
Customer Loyalty
-repeated order
-good referrals
Experienced training
and support Team
-Repeated services
-Source of referrals
-Market demand
-Proven prototype
-Strong management team

4. Questions
Why are Franchisors more able to do this today than in previous decades? What are the factors that encourage a Franchisors to move out of their domestic market? What are the factors that attract a foreign Franchisors to a specific overseas market?

5. Why are Franchisors more able to do this today than in previous decades?
International Franchising as a method of market entry & distribution has experienced a remarkable growth for the last 2 decades.
Dynamic growth in service industry brought about by government deregulation policies and removal of trade barriers
Provision of readily available financial assistance for small/medium businesses to create jobs.
Dramatic changes in retail marketing structure has favored franchising over “Being your own Boss” alternative as it does not require a huge amount of capital.

6. Why are Franchisors more able to do this today than in previous decades?
Technological progress in global telecommunications which engendered significant rise in global advertising which enabled customers around the world to recognize famous brands
Popular adoption of international franchising as a form of economic development (Technology and Know How transfer).
Employees from middle and upper management positions be alerted to invest their severance packages in franchising activities.
The Internet enables easy access to a wide variety information and facilitates communication between franchisees and franchisors. Such developments have made franchising just about available to anyone on a world-wide basis.

7. What are the factors that encourage a Franchisors to move out of their domestic market?
Factors Underlying International Franchising
Firm’s resource endowments : Financial, human, technology.
Domestic Market Characteristics (Push Factors)
- Market saturation
- High level of competition
International Opportunities (Pull Factors)
- Profit & Growth
- Low level of competition
- Favorable legal & monetary framework
(no severe restriction on profit repatriation)

8. Significant activity throughout Asia;
What are the factors that attract a foreign Franchisors to a specific overseas market?
Franchising is no longer confined to national boundaries Internationalisation is increasingly common activity;
Significant activity throughout Asia;
‘Asian growth key to global status’
T.Leahy former CEO Tesco plc
Favourable Financial Conditions (exchange rates).

9. Consequences of Internationalisation
Increases competitiveness in the market;
Operational standards increased;
Reputations do not pay the bills;
Previous experience no guarantee of future success;
Size is no protection against failure;
Need for clear retail strategy;
Innovate or perish;

10. General Franchise Business’s Problems
On-going management fees are contingent upon continuous and rigorous control, operational back-up, marketing/promotional support.
Not an appealing method of foreign market entry at the early stages of the internationalization process. The method is adopted once it has proven successful.
Franchisor’s reputation and corporate image could be undermined in case of failure (Referred to 4.4% failure rate was found in the USA but in Asia, this failure could be more than 20%)

11. Franchise Internationalization
Companies are getting better at it;
Learnt from the mistakes of the past;
Display better understanding of consumer needs;
One size does not fit all
Acknowledgement of cultural, racial and religious diversity;
Ability to identify local demands and global aspirations - availability, choice and value. 11

12. Franchise Internationalization
Do many companies strategies involve elements of both global and multi national approaches?
Gather data on market trends.
Study direct and indirect competitors.
Develop profile of prototypical franchisees.
Understand real estate and size challenges.
Any discussions with prospective candidate must be very preliminary.

13. In practice.. Stage 3 Ambition Geographical Presence Stage 2 Caution
Stages in the development of International Franchise Businesses
Stage 1
Reluctance
Stage 3
Ambition
Stage 2
Caution
Geographical Presence
Time

14. Neighbourhood Countries
In practice..
Stages in the development of International Franchise Businesses
Stage 1
Domestic expansion
Stage 3
China, Japan
Taiwan, Singapore
Korea, UK
Stage 2
Neighbourhood Countries
AEC
Time
Geographical Presence

15. In practice..
Learn about partner - Personal relationships, not contracts, often more important to success - “Airport” deals (single meeting to sign agreement) are often inadequate Learn about partner – Investigate Credit report Private investigator - Use negotiation of agreement to learn about your partner What is important to your partner

16. In practice.. Focus & Cluster - Often best to have
10 units in 1 country
NOT 1 unit in 10 countries
Daily Presence - Especially in beginning, often crucial to have franchisor representative on the foreign ground
International operations – in the beginning are going to take longer and cost more than you may expect. Don’t count on inflows from overseas to compensate for shortages at home

17. Law and Regulations Trade mark Law Antitrust Law
Consumer protection Law
Industry specific regulations.
Real estate ,finance ,food handling, health care, liquors
Labor, health and safety.

18. Regulation flow chart Franchise Law Liquor Labor Taxation
US -14 registered
states
Business
opportunity Law
Franchise Law
US - FTC rule436
Liquor
Labor
Taxation
Business Regulations
Trade Mark
Law
Anti trust
Law
Termination
Renewal
Relationship Law
Consumer
protection
Contract law
Discontinue
contract
Case Law

19. Finance Support for International Franchise
Solid Capital Structure
Start up Cost
Research
Operation Manual
Training Programs
Sales and Marketing Material
Personal Recruitment
Accounting/Legal Fee
Prototype Unit
Consulting Fee
Travel Cost
Sales Rep.
Trade Show

20. Present by Dr.Peerapong K. www.peerapong.com
Indonesia Franchise
Present by Dr.Peerapong K.