Critical Evaluation of the Franchise model of International Expansion

This report critically evaluates the franchise model of international expansion for Wenzel. It discusses the benefits of franchising, access to better talent, easy expansion capital, minimisation of market growth risk, and more. It also reflects on the learnings and outcomes, difficulties faced, opportunity recognition, applicability of process, learning from others, and enhancement of presentation/multi-media/communication skills.

Running head: MANAGEMENT
Management
Name of the student
Name of the University
Author Note

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1. Critical Evaluation of the Franchise model of International Expansion
The high end benefits of the implementation of the Franchise model of international
expansion prompted the researcher to take up this model as the feasible market entry mode.
This model have been selected for the international market entry of Wenzel after analysing
the pros and cons of the franchise model only. The critical perception of the researcher in
context of selection of this market entry strategy and the aspects that allowed him to select
this model over the others, have been presented in this critical evaluation section of the
report. The first aspect that is needed for the successful operations in the international market
is the access to better talent. The company needs class apart culinary staff along with caterers
who understand the organisational culture and the essence of customer goodwill that is one of
the strengths of Wenzel. Franchising allows the organisation to choose the best people in the
industry who can give value to the organisational culture. The business value that is
generated as an outcome of working under the banner of a global brand gives the franchises
the desired incentive to work hard. In this context, Rosado-Serrano and Paul (2018),
perceives that the most proficient and hardworking individuals in any market generally prefer
to invest for a running business, rather than occupying a salaried position. Hence, it is evident
that franchising can give Wenzel access to the best in class business operators.
Wenzel can also get access to easy expansion capital as an outcome of embracing this
market entry strategy. In this model of international expansion, the franchise partners are
liable to pay for the setting up of the outlets in the business chain of the Wenzel Company.
The company, by means of the implementation of this model can increase the number of
outlets in their desired locations without utilising much of their own start-up capital. They
can also avoid taking loans from foreign investing agencies or banks and as such gain
exemption from paying the outstanding interest against the loan amount. As it is evident, the

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shared liabilities of the parent company against this model is lower. Therefore the level of
business risk against this market entry mode is very low. Another feasible advantage that the
organisation will enjoy as an outcome of implementing this business strategy is minimisation
of market growth risk. As stated by Rosado-Serrano, Paul and Dikova (2018), franchising
leads to generation of high end financial returns for substantially low operational risk. One
important aspect of franchising is that the outlets are not owned by the core operational
bodies. However, in that context, it deserves mention that the impact of reduced revenue
return on the company is also less. In case if the company finds that a specific franchise is
unable to give value to the brand name or generate adequate revenue, the company can easily
afford to shot to some other franchised operator without much transfer capital expenditure.
Again, in case if the company finds that a particular location is not suitable for sales, they can
order the franchise to shift to a different location. In case if the company finds that the
selected franchise would not be able to give proper value to the business, they can easily shift
to a different operator. As Baena (2018), states, the business model of the organisation is
already tested and that is why they have been able to gain entry to the foreign markets.
Hence, it is obvious that with a sound business model, the organisation would be able to earn
high royalties from sales at those outlets. In fact, Robson et al. 2018), opines that the
percentage returns that the company would be able to earn from the operations of the
franchises would be much higher compared to what the organisation would have earned if
they were operating by themselves.
However, there are some negative aspects that needs to be considered also. The
organisation always have less control over the store managers when they are operated by the
franchises. That is why, the company have been operating an online customer feedback portal
whereby they regional managers of the company would be assessing the customer reviews

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regarding their experience in various franchised stores of Wenzel. This would give the
company a strong perception about the state of affairs at the individual Wenzel outlets.
2. Reflections on learnings and outcomes
2.1 Difficulties faced and policies to overcome them
One major difficulty that the company faced in the path of international expansion is
in context of their market analysis. The business data that the company gained in the course
of searching for new markets for expansion is not relevant. The market conditions of the
bakery industry in the international markets is very dynamic and almost no relevant
contemporary information was available to the company regarding the bakery industry in the
new markets.
This is why, the company had to rely on the credibility of the individual franchises
and the royalty ratio had been kept low. After one year, the company would renew their
royalty contract if the market operations are found sustainable. Besides that, the company
also needed to conduct first hand market survey in order to understand the major trends of the
bakery industry in the international markets.
2.2 Opportunity recognition
Since the company had to conduct first hand market survey, the business
opportunities of the foreign markets were selected very tentatively. Madanoglu, Alon and
Shoham (2017) mentioned that many emerging opportunities are coming from German
bakery products with the inclusion of health bread substitutes and package. I have also
identified that Germany in the coming days could continue to be a highly competitive
markets owing to strong domestic production as well as economic food pricing. It has been
identified that while Germany holds the top positions in the bakery sector in Europe, Italy,

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Netherlands and Poland could collectively account for almost 43% of Germany’s imported
products.
Australia is another selected market where the company is supposed to start opening
their stores. Australia’s baking sector is operating particularly in mature market and turnover
in the manufacturing sector is estimated at almost 7.9 billion which particularly it is observed
that plant bread bakeries in Australian bakery sector accounted for 60% of the overall bread
production. Plant bread volume is under the slow decline for almost 3 decades and it is
expected to decreases in real time per capita over coming 5 years to increase market share
from the franchisee represents 8.9% real growth from the previous year.
2.3 Applicability of Process
Since the market conditions of the bakery industry in Australia have been more
dynamic, the organisation is adopting the microscopic market entry model. They are
developing royalty contract of bi-annual basis, post which the contractual terms are renewed.
In the German market, I have observed that the two factors, namely strong product
demand and stable supply rate, prompted the company to form long term contracts with the
operators with a 60:40 contractual earnings ratio with the franchises.
2.4 Learning from others
The franchise model is highly in implementation in the German market. However, it
deserves mention that all the organisations that are running franchise based business in the
food and confectionary sector have strong organisational control on the individual franchised
operators. This is why there is stability in the market operations of the franchised outlets. I
feel that this had been a significant learning accomplished from the other agencies. The
organisation implemented this managerial framework in both the foreign market where they
have decided to spread their business. There are zonal business heads, to whom the individual

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outlet managers are accountable. Besides that, it has been observed that the customer
feedback are greatly valued in the bakery and overall confectionary industry of both
countries. That is why I feel that the policy of developing a separate web based for reviewing
of customer feedback is a good strategy that can help the managers to understand the state of
affairs at each franchised stores.
2.5 Enhancement of presentation/multi-media/communication skills
The customer feedback collection is a valuable communication strategy implemented
by the organization. Other than that, franchising helped in strengthening the market presence
of the company since they were able to open more stores in both countries over a shorter time
pried as an outcome of implementation of the franchise model. This is helped in easing the
brand communication process.
3. Reflection on Engagement
I have attended major number of sessions held between the weeks 3 to 11. The
learning outcomes that I achieved have been of great help in developing the project. I
understood the importance of adopting to an internationalization strategy. I also learned how
the business model of franchise and others also, can be effective in helping the organization
to develop branches in foreign market. I also refrained from remaining absent in any of the
classes. However, I had to skip only two of the sessions because of excess mental stress that
led me to develop recurring medical conditions.

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Reference List
Baena, V., 2018. International franchise presence and intensity level: profile of franchisors
operating abroad. Management Research Review, 41(2), pp.202-224.
Madanoglu, M., Alon, I. and Shoham, A., 2017. Push and pull factors in international
franchising. International Marketing Review, 34(1), pp.29-45.
Robson, M.J., Kadile, V., Watson, K. and Clegg, L.J., 2018. International Franchising
Relationships. In Advances in Global Marketing (pp. 427-446). Springer, Cham.
Rosado-Serrano, A. and Paul, J., 2018. A new conceptual model for international franchising.
International Journal of Hospitality Management, 75, pp.179-188.
Rosado-Serrano, A., Paul, J. and Dikova, D., 2018. International franchising: A literature
review and research agenda. Journal of Business Research, 85, pp.238-257.