Retailers could look to franchise model to expand around globe

Professor Matthew Robson of Leeds University Business School
Professor Matthew Robson of Leeds University Business School
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FOR an island nation with a successful history of trade around the world, it is something of a puzzle that so many UK retailers tend to stay close to home. While a few companies have grasped the nettle and expanded their business overseas, as a general rule our nation’s shopkeepers have focused their energies on building, or at least maintaining, sales in their core domestic market.

This is perhaps understandable given the intense competition on the UK high street. The most recent Christmas sales figures confirm yet again just how tough it can be for retailers, even at the busiest time of year. But one outcome is that some of our most successful companies have missed out on expansion in emerging markets, and the higher growth rates that they offer.

A research project at Leeds University Business School has looked at how to change this trend, and whether British retailers could successfully expand overseas by using a different mode of business. Specifically, we wanted to know whether franchising might be a good way to grow abroad.

We carried out an in-depth analysis of how one large, multinational UK retailer used a sophisticated franchising model to expand in the Middle East over several decades.

We found that the model used, Area Development Franchising, had been critical in enabling the company to expand overseas and into markets where there is high growth but also sometimes political, economic and social instability while minimising risk and investment.

We believe that there are a number of lessons which British firms could learn from this, and which we set out in a new report, ‘Best in class in international franchising’, which we are launching at a high profile event in London on Friday, January 22.

Lessons from the research, funded by the Economic & Social Research Council, include:

Do not just expand into neighbouring markets – think big and look to emerging markets where UK-branded products are positively perceived

Seek out and forge good relationships with a small number of area development franchisees. Listen to their ideas and make the most of their local knowledge and contacts

Be willing to be flexible on things like price to suit local markets but make sure that customers are treated equally across different markets

Anticipate that the global supply chain will be difficult to optimise so invest in IT and communications.

The ‘Best in class in international franchising’ report is a practical guide for UK retailers interested in using this franchising model, and anyone interested should get in touch and attend the event. Details at www.business.leeds.ac.uk/retail-event

One major British retailer has already reaped the rewards of expanding overseas using the franchising model, and our report provides invaluable guidance for others looking a bit further from home, too.