A courier company has adapted its franchise system, enabling it to quickly and cost-effectively expand into foreign markets.
| Business type
||1200 courier franchises; seven master franchisees; 30 staff working in Australia, New Zealand and Europe
| Contact details
Key Learning Points
Before expanding internationally, check that your business model will work. One cost-effective way is to hire students in the target country to gather price and service information about your potential competitors.
Global brand awareness
An international marketing and recruiting campaign can be very expensive. Be clever about it. Concentrate on appearing at international trade shows and in industry publications, using both for follow-up marketing activities and to direct people to the company web site. All brochures, advertising, press releases and vehicles have the web site address.
Embarking on international expansion takes effort, time and commitment. Be prepared to move overseas and work long hours to establish the business - but plan for your next holiday and for the time when you can hand over day-to-day management.
A business model that is successful in one country may not be the most suitable or efficient elsewhere. Examine your systems and structures. One model is to set up a franchise system and then grant a National Master Franchise in each country.
Communicating and managing across time zones and languages can be a nightmare. An easy solution is to set up an intranet with all essential reference material, reporting systems, and daily communications - in the language of each country where you are represented.
By using software to track product sales, good revenue estimates can be obtained. Fastway, for example, tracks how many packages are being moved. It can then check that the revenue figures provided by master franchisees are correct.
Do not consider international expansion unless the business in Australia is solid.
The Fastway Story
Bill McGowan has had tremendous success expanding his courier franchise in Australia and New Zealand. The business, which was established in 1983, has a clear niche - concentrating on market segments that are ignored by large courier companies.
When Fastway started, its large competitors focused on high-yield, fast metropolitan delivery. McGowan saw the need for a metropolitan area service for those parcels that did not require instant delivery. He managed to make his service cheaper than the competition by introducing innovations such as pre-paid labels. Fewer staff were needed for administration and chasing bad debts.
By 1999, McGowan decided the company was large enough and solid enough to look at overseas expansion. During the next two years, he spent about $2 million researching opportunities in various countries. By hiring students to talk to potential customers and visit competitors, he discovered that good expansion opportunities existed in Asia and Europe.
To establish his business in each new market, McGowan decided to add another tier to his two-tier franchise system. The first tier is the courier franchise who is granted exclusive territory by Fastway to pick up and deliver parcels within that territory. The couriers converge daily at a depot where the parcels for other areas are exchanged. The next tier is the regional franchisee who provides the depots and other business services.
McGowan’s third tier is the master franchisee, who is granted the rights to the Fastway system for an entire country. He says: "It is too time consuming to go to each country and grant a franchise one by one."
To attract the right people as master franchisees, McGowan promoted the company at trade shows, advertised in industry publications and promoted the Fastway web site on vans and in ads. He set up a rigorous six-month master franchisee training system, which is paid for by potential master franchisees. During the program, they travel to Australia to undertake research.
There are now seven master franchisees covering England, Malaysia, Germany, Ireland, Scotland, Wales and the Irish Republic. Master franchisees for Morocco, Spain, France and Portugal were near the end of their training in June 2002.
One master franchisee has failed. Two years ago, McGowan shut the Singapore franchise for not complying with the Fastway system.
McGowan says his expansion has been a success. To March 2002, overseas operations had provided $30 million of the Fastway group’s $180-million turnover. A year earlier, overseas operations contributed $10 million of the group's $150-million turnover. However, McGowan says international operations will not be profitable until 2005 as the support costs to assist the master franchisees are so high.
McGowan estimates that Fastway has a 10% share of the Australian courier market and that in two years overseas revenue will equal the turnover of the Australasian business. He values the business at $30 million and owns a 42% share; the rest is held by 22 other shareholders including external investors, staff and directors.
McGowan is working 12 hours a day, six days a week to establish the international operation, but he says he is keen to reduce his direct managerial role in the next few years. He says: "I am a very focused person and have all my personal and business goals written down. One goal is to start stepping down a little next year and take a holiday."