Growth can be expensive, but it is always more expensive when the expansion is taken without risk assessment. Whether domestic or foreign, many risks can be reduced or avoided by proper consideration of differences between where you are now, and where you want to go.
For illustration, the examples here will be for foreign expansion, but the same issues confront domestic expansion as well.
Many factors need to be taken into account in new territories. National chains offer localized products in particular territories. A hamburger franchisor offers biscuits in the South, and lobster rolls in the Northeast, and chili peppers on everything in New Mexico, even with all of its hamburger options. What are the consumer preferences in the new frontier or for Generation Z–which is bigger than either the Boomers or the Millennials?
Now imagine going global. In India, the hamburger giants need to remake their signature sandwiches because cows are sacred. In addition, the packaging must reflect at a distance whether the contents are vegetarian. Church’s Chicken is understandably called Texas Chicken in the Middle East to avoid offending the majority populations.
Logistics must insure that the quality and availability of the products is reliable, and the look and feel of the retail outlet reflects the brand. Brands need to insure the availability of products, fixtures, supplies and equipment. The goal is instant recognition of the brand. Freshness and quality is essential. You do not need headline risk if your food is not wholesome. Think of the baby formula scandals in China that resulted in global headlines.
In comparing risks to rewards, your ultimate goal is to generate more revenue and promote awareness of the brand. But what sort of investment do you need to incur before those goals are realized. Growth is never cheap and cheap growth is never good. You need to know the growth is suitable and sustainable.
What are the critical the legal and business issues you should be considering? We’ll discuss those in our next post.