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HomeSpecial FeatureSpecial Feature - Expansion & Franchising - Growth on a Global Scale

Special Feature – Expansion & Franchising – Growth on a Global Scale

Despite all the challenges the retail sector has seen in the last few years, many still continue to grow and expand their footprint, both in their home markets and abroad. Expansion through franchising is still seen as a low-risk, high-reward strategy and over the coming pages RLI will take a look at the current state of the market and highlight some companies who continue to make major moves on an international scale.

For companies who have plateaued when growing their business in their home country, expanding via franchise into new markets in foreign countries can often be the next step in the growth process. But replicating a business in another country is a complicated task involving a great deal of forethought, expertise and experience. This is the viewpoint of Alice Tuffery of Point Franchise in her article ‘Growing your Business Through International Franchising’.

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Primark, Sawgrass Mills
Florida, US

According to the Franchise Direct article ‘3 Reasons Business Owners Turn to Franchising for Expansion’, they explain that the first benefit is access to capital. To enter a new market, business owners would have to come up with the money themselves. With a franchised business, the business owner as franchisor is able to tap into however many streams of capital as it has franchisees. Secondly, by franchising the franchisor is able to gain access to market knowledge in a variety of areas. Third, franchising also allows for the business to expand without spreading its top level managerial resources across too thin.

Franchising is a model that many businesses make a great success of all over the world. It involves a franchisee – usually an individual or individuals – buying the rights to run a business using the franchisor’s successful business model. This will include the rights to use the franchisor’s brand and trademark. This opinion is from Naseem Jeewa, Project Director at Bubbles Translation Services in his article ‘International Expansion Strategies: Franchising’. He continues by saying that international franchising works in the same way, but the franchisor is selling the rights, or ‘franchise’ to franchisees based in overseas markets. This allows the franchisor to expand internationally without having to physically up sticks and operate his/her overseas branches/locations, leaving the hard work to trusted local franchisees instead.

Discussing keys to a successfully international franchise, Jeewa explains that one of the best places to start looking for the right franchisees in various markets overseas is the International Franchise Association. It can provide you with guidance and advice every step of the way when embarking on an international franchise project, but can also help you to find franchisees. A good franchisee is usually someone who has a proven track record in running businesses like yours and who has strong contacts and experience in the region into which you are expanding. You can make your franchisee recruitment process more robust by attending relevant international industry events and ensuring you have a faultless and high-profile online presence, as this helps to attract high-calibre people to your brand.

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EL&N, Panorama Mall
Riyadh, Saudi Arabia

In his piece titled ‘International Expansion Through Franchising’, Stewart Germann from Stewart Germann Law Office explains that successful franchisors who operate in their local markets usually look to expanding their system by way of international franchising which provides an attractive opportunity for businesses seeking growth with reduced start-up investment costs and reduced liability exposure. With air travel opening up around the world and more and more people being vaccinated against COVID-19 and the new strains of the virus, franchisors are travelling and meeting candidates in various countries. Emerging markets also offer excellent opportunity for growth.

He continues by saying there are a number of different franchise models which a franchisor may consider for international growth. The most common models used include master franchise, area development, area representative, joint venture arrangements, and single unit and multi-unit methods. Choosing the right development model is essential and it is also important for a franchisor to have intellectual property protection, including registered trademarks, in the country or countries on the international expansion monitor – this should be done at an early stage for, if not, a franchisor may miss out on having a registered trade mark in a particular country.

Lily Sweeney, also of Point Franchise highlights in her article ’2022 Outlook: The State of Franchising in the Retail Sector’ that if companies are looking to start their own retail franchise in the near future, you’ll be pleased to know that the vast sector still has plenty of room for you. Retail sales figures are already recovering nicely from the impact of Covid-19 [Office for National Statistics], and the huge amount of competition in the industry is met with an equally huge amount of demand. Plus, there are so many different sub-sectors that you’re essentially guaranteed to find an investment option that perfectly suits you.

Retailers Expanding Around the World
Mango plans to expand its presence in Canada with the opening of six new stores in Toronto by the end of next year. That’s part of a broader deal the Spanish fashion retailer has struck with Fox Group to open at least twenty new stores in Canada over the next ten years as a condition for extending the agreement. Fox Group, which is listed on the Tel-Aviv Stock Exchange, is Mango’s partner in Israel, where it manages 47 of the group’s stores. Mango already has close to fifty points of sale at Canadian department store chain, Hudson Bay. The retailer said the new store openings in Canada are part of its wider commitment to expanding its presence in North America.

Primark has signed three new leases, bringing it into two states, as it continues to slowly but steadily grow its US footprint. Primark’s newly announced stores will see the brand open its first-ever locations in Maryland and North Carolina, as part of its goal to hit 60 stores in the US by the end of 2026, up from 13 today. The three new Primark locations will be at Smith Haven Mall, Lake Grove, New York.; Arundel Mills, Hanover, Maryland and Concord Mills, Concord, North Carolina. Founded in Ireland in 1969 under the Penneys brand, Primark is aiming reach 530 stores by the end of 2026, including upcoming new markets of Romania and Slovakia.

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Desigual, Maremagnum Mall
Barcelona, Spain

Desigual, the fashion label from Spain, is putting efforts to grow in Asia. In one such effort, it is expanding its online business in China. The clothing brand has joined hands with E-Shine wherein besides online expansion; Desigual also plans to build its bricks-and-mortar presence too. The 60 company-owned and franchised stores – as a part of the deal – will also include two flagship stores in Beijing and Shanghai. In the next five years, the brand intends to enhance its turnover in China to €40M. Notably 50 per cent each of the same will, reportedly, come from bricks-and-mortar stores and online. Desigual has a presence in 107 countries, with 428 mono-brand stores and more than 2,700 employees worldwide.

In an effort to boost outlet expansion in the nation, US brand Starbucks plans to resume its expansion plan by establishing 90 new stores in Thailand by 2024. Starbucks, which opened its first store in Thailand in 1998, now has 444 locations in the country. It also offers services online through partners like the Singaporean e-commerce sites Shopee and Lazada. The company reported growth in revenue in the first half of the year and has since established 15 new locations in Thailand in 2022. The new stores are mostly located in gas stations and neighbourhood shopping centres. The company has intentions to open an additional 15 stores in the remainder of the year.

Boutique coffee group EL&N opened its first site in Italy earlier this year in the Liberty Tower, Piazza Del Liberty, in Milan, adding to its 20-strong international store portfolio. Milan marks the third European market for the influential UK-based business, which also operates a store in Paris, which opened at the end of 2021. The group operates 10 stores in London, the latest of which is situated at London Heathrow Airport, representing the first of many travel hub locations the boutique café chain intends to open. EL&N has also expanded into the Middle East, where a newly opened fourth site in Riyadh, Saudi Arabia, accompanies EL&N sites in Doha, Dubai and Kuwait. EL&N, renowned for its lavishly decorated interiors, is one of few boutique café groups to expand internationally.

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Mango, Boulevard Haussmann
Paris, France

French brand Destree has begun its retail expansion with the launch of its Paris flagship. The unique 50sq m space was conceived by Brooklyn-based sculptor Simone Bodmer-Turner to reflect the brand’s Paris and New York influences. This significant step forward for the premium brand came just a few months after its capital increase. The Series A strategic operation, which closed last April for which financial details were not disclosed, brought in a select group of internationally renowned investors, led by the likes of Beyoncé, Rihanna, Jessica Alba, Gisele Bündchen and Reese Witherspoon. Destree is currently present in the physical channel with 80 international points of sale, including department stores and concept stores and has just recently launched a new corner in Le Bon Marché, in Paris and a pop-up space in London’s Selfridges.

The Watches of Switzerland Group is set to open multiple mono-brand boutiques across Europe and the first was a Breitling store in Stockholm. The roll out, initially concentrated in Scandinavia and the Republic of Ireland, continued with additional Breitling stores in Stockholm Mall of Scandinavia and Copenhagen, plus an Omega showroom in Copenhagen last month. The Omega store will provide the best watch and jewellery shopping experience. For customers in Copenhagen, this boutique will represent the best of the Omega brand. It promotes excellence, expertise and is the perfect space for clients to make their watch choice.

AG Café, the master franchisee of the Tim Hortons brand in the Middle East, plans to expand the coffee chain in Saudi Arabia to more than 200 outlets by 2024. AG Café said the expansion follows its belief in Saudi Arabia’s Vision 2030 strategy, adding that it led to moving its main office to Riyadh last year, becoming the first global F&B company to relocate to the Kingdom. AG Café said it currently operates 90 coffee shops in the kingdom spread across Riyadh, Jeddah, Abha, Mekka, Al Khorj, Al Khobar, Al Madina, Al Dammam, Al Zahran and Khamis Mushait, with a total number of more than 190 Tim Hortons cafés across the GCC.

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Giordano, Dubai Hills Mall
Dubai, UAE

Giordano, the global apparel brand known for its everyday wardrobe essentials, opened its latest flagship store at Dubai Hills Mall. The shop is centrally located on the ground floor in front of the Hypermarket. In a move to reinvent itself and adapt to current trends, Giordano is showcasing its cutting-edge store design across the region. With a fresh look, the new store aims to redefine simplicity while embracing a more classic concept. Giordano is aggressively expanding operations in the Middle East, Africa, and Central Asia. With multiple stores in the pipeline, innovative store designs and growing customer loyalty, Giordano maintains its powerful presence.

Jysk A/S is a Danish retail chain, selling household goods such as mattresses, furniture, and interior décor. Jysk is the largest Danish retailer operating internationally with over 3,100 stores in 51 countries. In recent times they have begun expansion throughout the UK as part of their plan to reach 5,000 stores worldwide. The company’s steady growth across the world is owed to a continued focus by customers on home and garden improvements coupled with store expansion over the last year. Four new JYSK stores are due to open throughout this year.

The UK’s fastest-growing chicken brand, Popeyes® Louisiana Kitchen UK, has announced its next raft of UK restaurant openings, with in-line sites due to open in Derby, Leicester, Liverpool and Cambridge. The news comes off the back of the successful launch of its two latest sites, Gateshead and Oxford, which saw the huge queues out the door that guests have come to expect from Popeyes® UK restaurant openings. Its Derby site will open to the public in late October, with launch dates for the remainder of the restaurants expected to be announced soon.