Interview with iadvisor: Franchising in the USA

iadvisor T.K Lee of Asia Franchise Networks, shares on the procedures and cost of setting up a franchise in the USA, untapped sectors suitable for Singapore companies and much more.

1. What is the typical process that a Singapore company would have to go through to set up a franchise in the US?
a) Learn and assess the market opportunities and challenges

b) Strategic planning to decide mode of entry

c) Financial modeling and start up financial capital planning

d) Franchise Disclosure Document (FDD)

e) Franchise Agreements.

f) Prove of Concept startup either with friendly franchisee or own unit.

2. What is the typical cost of such a process?

The range varies substantially depending type of business model and cost structure. Excluding the Prove of Concept, for items (a) to (e) above, rough estimate is between US$50,000 to US$100,000.

3. What are the main challenges?

i) Lack of understanding of the market requirements and preparations needed to be done before taking this strategic market entry decision.

ii) Inadequate financial planning and capital allocated during start up phase.

iii) Time – estimated 12 months of preparation plan.

iv) Franchise regulation at national and state level. Legal requirement appears complex.

v) Finding and hiring competent and cost effective US service providers.

vi) Managing the US market entry project from Singapore.

4. What are some of the relatively untapped sectors or business opportunities in the US that are suitable for Singapore companies?

In our opinion:

i) Asian food – fast food and café concept, Asian kopi stores and bakeries.

ii) Education – mathematics and financial education for kids, mandarin language classes.

iii) Travel – cost effective travel programs to learn about China and Asia.

iv) Lifestyle stores providing elegant but much lower cost of products in US malls.

5. What tips can you provide to Singapore companies planning to venture into the US?

i) Take time to learn about the market, opportunities and challenges.

ii) US market entry decision is a strategic decision with financial capital plan.

iii) Avoid the common mistakes made – do not shoot at first opportunity without careful evaluation and planning as failure can be very costly.

iv) Right expectation – Need to prepare for 3 to 5 years of support and development resources.

v) Follow rules, regulations and laws.

vi) Take time to understand why not many Asian brands successfully entered US market.

All answers are provided to the best knowledge of the iadvisors at the point of question, and are solely represented by the iadvisors, not IE Singapore.

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