This is not your father’s IFA
Not many years ago a member of the board of directors of the International Franchise Association took the floor during a board meeting to propose the association drop the word “International” from its name. His impassioned argument: A lot of member companies don’t care about international expansion, and never will.
Preserving the name is an exercise in grandiosity, he continued, not matched by reality. Any resources expended on international matters simply deplete what is available for IFA’s historic, true and only objective, advancing the place of franchising in the United States.
If memory serves correctly, his motion failed for want of a second. But it opened the door to some disquieting truths in the closet: Almost all of the cross-border activity was that of a relatively small number of very large franchisors. The vast majority of the expansion was by foodservice companies, augmented by hotels and car rental franchises.
Despite some effort to reach out to non-U.S.-based franchisors and suppliers, virtually none had responded by joining IFA or participating in its activities. The deployment of IFA’s own resources reflected that reality: Only a small portion of the time of one staff member was devoted to international concerns.
Anyone who is laboring under the misconception that not much has changed in the intervening years would do well to spend some time examining the recent international issue of IFA’s publication “Franchising World.” It’s an eye-opener, reflecting the changes, not only within IFA and its members, but in the world itself.
Here’s some of what you will see—very little of which you would have seen during the last half-century of IFA’s existence:
1. Reminders of the sheer size of “international franchising”: With the global middle class (the target for almost every franchisor) projected to grow from 2 billion to nearly 5 billion in the next 20 years, aggressive companies are wasting no time gearing up.
More than a third of the units of the 200 largest U.S. franchise brands are already overseas, with the share predicted to rise to one-half by the end of the decade. More than 80 percent of respondents to a recent survey believe international growth is crucial to their future success. Of those now in the early stages of formulating their international plans, more than half expect to begin this year.
2. The staggering number and diversity of U.S. franchisors involved: In addition to numerous individual ads, a directory, in 10 categories, of some 500 companies self-described as seeking international expansion.
3. Evidence that it’s no longer just the giants: Consider the thoughtful “emerging franchisor’s perspective” by a company that only began franchising in 2008, but has attracted franchisees in the Middle East and elsewhere.
4. In addition to a focus on certain geographic markets, examination of questions that would previously have received attention only by a handful of sophisticated operators: Even though few U.S. franchisors own properties outside this country, what can they do to enhance the likelihood that their foreign franchisees will make wise real estate decisions?
What can a franchisor do to make the arduous and expensive task of translation both more tolerable and more effective? How can U.S. franchisors attract foreign investors to U.S. franchise opportunities, and what are the U.S. government programs that can facilitate such an initiative?
5. Beyond the ads for U.S.-based international franchising consultants, take a look at the number of advertisements for the growing number of foreign consultants, foreign law firms and even franchise associations in other countries.
6. Scattered throughout the publication are reminders of the myriad other activities that provide almost daily evidence of the proliferation of international franchising, the people, the companies, the activities: The list of more than 40 national associations belonging to the World Franchise Council. The 25 events scheduled to take place in the last half of 2014 alone.
The new members of the association, including some from outside the continental United States. And a spread on the program conducted jointly with the International Bar Association. This year, it will be the largest in the 30-year history of that event, with more lawyers from abroad than ever (and not just from Mexico and Canada, but from 20 other countries).
7. Finally, the IFA’s own plan of action: Last year the IFA board approved an action plan proposed by a newly formed strategy group designed to increase value for members, attract new members (both international and domestic) and greatly enhance both its knowledge of and investment in international franchising.
Since that time, the association has created a full-time international director; established several groups focused intensely on the task; and facilitated matching trade missions and hosting international investor delegations, among other things.
Finally, the association is at the early stages of exploring the feasibility of expanding its highly effective advocacy program from the United States to a more global vision.
Perhaps it’s time to pause for a reality check. Plenty of those 500 listed companies are not, realistically, ready for a robust program of international expansion. Some of the suppliers’ ads strongly suggest there is less there than meets the eye.
But, after all, the IFA is not providing warranties as to each of these and caveat emptor remains the operative admonition. Indeed, even the IFA itself is still working its way toward a sustainable program of international promotion and advocacy.
Those cautions notwithstanding, the underlying facts remain indisputable: The world of franchising is far more global than it was even a short time ago, and that reality has the potential to embrace virtually every franchisor. The “I” in “IFA” has earned its place, and is here to stay.
Philip F. Zeidman is a senior partner in the Washington, D.C., office of DLA Piper. He can be reached at Philip.Zeidman@dlapiper.com.