5 THINGS TO CONSIDER WHEN DECIDING WHERE TO EXPAND INTERNATIONALLY
International expansion – it’s a hot topic in our business. It’s also a topic that requires careful consideration and assessment of your brand, from a 360-degree view. Timing, market of entry, brand readiness, adaptation requirements, development plan, expansion strategy (…and the list goes on) all need to be dissected and understood before you take the leap. While many of these elements are dependent on each other, all should be well aligned within your overall execution plan.
Within that plan, the question of “Where?” is a very important one. Here are five key factors to consider when analyzing international markets for expansion.
Market Landscape. What is the current market environment in the restaurant industry where you’re considering expanding? What are the differences in economies from your home market? By assessing the economic climate in your sector, you can get a general gage on the earning potential of your brand in the potential market, potential adaptations you may need to make to your business model due to variances in price point, labor costs, legislation and taxation, consumer spending capacity, market saturation and more. What about competition – how competitive is the climate in your sector, and is there room for additional players, or will your primary objective me to take market share from existing players? Who are those players, and what are their USPs and success rates? To get a firm grasp on the landscape and how your brand will fit in, an in-depth market study is always best, but the above will get your analytical juices flowing on what to start looking for.
Market Gap. Are you considering a market where consumers are familiar with some version of your offering? If your brand offers a specific type of cuisine, is the market already familiar with your cuisine, or will you need to invest in consumer education? And if cuisines/concepts such as yours do exist, is the market saturated, or is there room for more players? Should you choose to launch in a market with little to know recognition of your concept, educational marketing and other similar strategies will be important for getting the customer in the door. The benefit to this is that you will be the first one to the market, giving you an advantage over any incoming competition, should the offering be well- accepted. At the same time, it will be important to manage financial expectations, particularly on ROI, as the consumer education process may require a lengthier investment of time before you experience complete market acceptance.
Brand Recognition. Is there any level of brand recognition in the market that you’re considering expanding to? It’s not a requirement for successful market penetration, but it certainly does shorten the process. If we look at brands like Jolibee or Five Guys, brand recognition can be an excellent propellant for initial sales, helping to make a real impact on entry. Doing the research to understand where you stand in the new potential market will pay off in the end. International travel and relocation were at some of their highest levels ever, before the pandemic, so it’s likely that the population of neighboring countries has a higher percentage of consumers who have experienced (and like) your brand. If you are unsure as to what kind of brand recognition you have in the market, PR activations such as pop-ups, can be a great way to gage consumer appetite before you make the final decision.
Geographical Distance. When expanding internationally (especially for the first time), it can sometimes seem easiest to go to the first market you receive interest from – whether it be from a potential partner, social media followers to online requests. On one side, this could be a faster way to get the deal done if you are being contacted by potential franchise or JV partners. On the other side, you could end up in the scenario with your first international site on the other side of the world, missing out on the benefits that come with expanding into a closer market. Additionally, expanding into a market farther from home can pose additional challenges in managing time zone differences, logistics barriers and travel time, when it comes to supporting, training and managing the international onsite team. If this is your first time going outside of your home country, having easy access to the new market will reduce growing pains and allow you to be flexible as you support your team from your home base.
Cultural Differences. Every country has its own, unique culture, both socially and professionally. No matter which country you choose to start in, there will be a learning curve to adapt to the norms and regulations of doing business in that country. It will also be important to understand the consumer, as you work to implement operational adaptations and build marketing and PR strategies. Consider starting in a country where you and your team have a higher understanding of conducting business in that culture. Understanding the cultural differences between your market and the entry market will strengthen the relationship with your partners and employees in that market and support a smooth operation.
Any new international market will have it challenges, and there is there will always be a learning curve. The key choosing the right place to start comes from doing the necessary research to understand the consumer and market characteristics, if and how your brand fits in with them and what kind of growth opportunities these new markets can offer your brand.
