All Articles Food Restaurant and Foodservice Going global brings rewards and challenges to U.S. restaurant chains

Going global brings rewards and challenges to U.S. restaurant chains

3 min read

Restaurant and Foodservice

Some chains are moving faster than others to expand overseas, but virtually all U.S. restaurant companies are at least contemplating international moves as the domestic market remains relatively flat. Global restaurant traffic and sales fell in the first three quarters of 2009 but began picking up in some regions at the end of the year, according to data from NPD Group. Chains renewed their focus on international expansion last year as it became clear that overseas markets have greater growth potential than the saturated markets at home. From Subway’s announcement that its overseas units are on track to outnumber its U.S. restaurants by 2020 to  Dunkin’ Brands’ ambitious plans to grow in Asia to Chipotle’s recent announcement that it would open its second European location in Paris this year, chains across the board are mapping out international plans.

For some, the plans include heading back to markets where they’ve had operations in the past, which means they’ll have some brand recognition right off the bat. The Wall Street Journal reported that Wendy’s plans to fund international expansion with the proceeds from selling the Arby’s chain, and the company announced last week that it signed a partnership that will signal its return to Japan, a market it exited in 2009 when it ended a partnership with a different operator and closed all 71 of its restaurants there.

International growth may be the wave of the future, but it’s not without its challenges, from global food supply and pricing issues to cultural and legal differences that can make operating overseas tricky.  Depending on where in the world chains are looking to grow, the challenges can also include lack of access to financing and a reliable labor force, uncertain distribution chains, and religious and dietary differences that require customizing the menu, international franchise operators told QSR Magazine in a piece that looked at how quickservice operations are faring in several parts of the world.  In addition to those challenges, operators in some parts of the world have to deal with political unrest, such as the demonstrations in Egypt this year that forced KFC to temporarily close at least one of its locations in Cairo.

Still, chains that go in prepared for the challenges are reaping the rewards. McDonald’s served about 200 million consumers in Russia last year, and the chain plans to add 40 new restaurants there this year, ending 2011 with 315 units — all of them company-owned. Unlike other international markets, McDonald’s has no plans to partner with franchisees in Russia, an executive told The Moscow Times last week. While the franchise model does operate in Russia, Russian law doesn’t recognize the concept, although lawmakers are moving to strengthen business law to encourage franchising in the future. Russian entrepreneurs typically don’t have the access to training and capital that quickservice franchises require.

In other parts of the world, chains often partner with franchisees that already operate multiple brands and locations because have access to expansion capital and a track record that makes obtaining new financing more likely.

Is your company in overseas expansion mode? Tell us about it in the comments.

Image credit: dsteller via iStockphoto.