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Taking the temperature

IFE provides insights into franchise fever


Published:

Philip K. Zeidman

Over the years the International Franchise Exposition in Washington, D.C., has become a sort of litmus test: Is cross-border franchising continuing to expand?  Or has it plateaued?

Dateline:  Washington

Every year, when the time comes for the International Franchise Exposition, those in the international franchising community wonder what signs they will detect there for the future of international franchising.

After all, it is the largest gathering of the year for franchisors seeking to display what they have to offer globally. It is the only event which draws any significant number of non-U.S. prospective franchisees; indeed, representatives of the U.S. Commercial Service lead delegations from their countries to Washington. So over the years the International Franchise Exposition has become a sort of litmus test: Is cross-border franchising continuing to expand? Or has it plateaued?

As a litmus test, though, the IFE is obviously flawed. There are no systematic polls of those attending, no focus groups, no reliable reporting of deals made or contacts established. Any conclusions are thus inevitably based on anecdotes, or impressions, or snatches of conversations – surely a fragile basis on which to reach a judgment.

That is because those anecdotes are so frequently at war with one another:

  • A long-time veteran of franchising reports that he has soured on the IFE, and believes that the days of high rollers from abroad coming to Washington to establish contacts and evaluate possible master franchise opportunities are over. And that, he says, is because international franchising itself has hit something of a wall.
  • Only minutes later, another equally experienced franchisor said that IFE remains the sweet spot for those interested in selling franchises in the global market. International franchising, he firmly believes, has only scratched the surface of its potential.

Not much help there. Will the numbers themselves provide a more reliable measurement?  Maybe.

A quick survey of the exhibiting franchisors suggest that perhaps half are there at least in part to sell franchises beyond US borders. There are 300-odd exhibitors, but that includes a number of suppliers. Yet fully 130 of those exhibiting are listed as having an "export interest." More than 100 express an interest in selling franchises "worldwide." While the country of greatest appeal continues to be Canada (66 franchisors), it was striking how closely grouped were the other regions of the world. Approximately 50 franchisors are prepared to offer franchises in each of these regions: Asia, Australia/New Zealand, Central America, Eastern Europe, South America and Western Europe. Only Africa (33) and the Middle East (40) lag somewhat, but those numbers are higher than in the past (and the prediction from this corner is that interest in those regions will continue to rise). So it is crystal clear that, to the extent the IFE is a microcosm, U.S. franchisors are heavily betting on overseas markets.

Note the reference to "U.S. franchisors." That may be too narrow a perspective. There are 14 foreign franchisors exhibiting. And the osmosis extends beyond that measuring rod: 31 exhibitors are members of associations other than (or, typically, in addition to) the International Franchise Association. 

In the final analysis, one can not make a judgment by any of these criteria. But before walking away from the convention center in puzzlement, let us move 100 yards to the south, to the rooms where the educational sessions are being held. There, as always, is a full menu of offerings, and some of them have an international flavor: "Strategies for Penetrating the U.S. Market for Overseas Franchisors"; "The UFOC for Overseas Franchisors"; "Selling Franchises Internationally Without Getting in Trouble"; "Budgeting for Successful International Master Franchising"; "International Franchisor War Stories."

The central program on the international experience, however, is titled, as it has been for all the history of the IFE, "Global Franchise Expansion: Strategies for Lucrative and Planned Growth."  This three-hour program is aimed squarely at U.S. franchisors seeking to franchise abroad and what can we tell from the level of interest in this, the single most focused of the presentations?  The audience is the largest in the history of the program, and between three and four times its size last year. There is something in the air...

Does that give us a definitive answer? Of course not; the jury is still out. But does it give one pause? You better believe it.

Philip K. Zeidman is a senior partner in the Washington, DC office of DLA Piper US LLP.  He is general counsel to the International Franchise Association.

Phil can be reached at Philip.Zeidman@dlapiper.com

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