The world market is hungry for American brands—literally. As multiple restaurant executives will attest, iconic American fare—everything from burgers and hot dogs to pies and doughnuts—have an added allure overseas.
Despite this general demand, picking specific countries and regions in which to expand is more challenging than ever. A decade ago, the BRIC countries (Brazil, Russia, India, and China) dominated the conversation, as the four were predicted to be the most powerful economies by 2050. Today, some of those markets have already been saturated by limited-service brands, while political instability or rigid regulations impede development in others.
The following four countries offer a window of opportunity for brands looking to grow beyond U.S. lines, and each has at least one limited-service brand investing in growth there. But each of these brands is carefully plotting the growth in these countries; just as an expansion strategy tailored to Mississippi is unlikely to fly in Northern California, so too are successful strategies unique to each country.
Still, international expansion remains more of a reactive strategy than a proactive one. Many brands do not pick a country and then launch a campaign to attract prospective franchisees. Rather, restaurant professionals from those countries often take note of the brand while visiting the U.S. or other country where it already operates, and then approach the executive team about bringing it to a new market.
Last year, QSR showcased 10 international brands poised to cut their teeth through stateside expansion. Now we are flipping the lens to look at four noteworthy foreign markets and the brands that are planting their flags within those borders.
Panama
brand:
Wienerschnitzel
In early December, Wienerschnitzel threw a grand opening bash to celebrate the brand entering Panama. The soirée, which counted the U.S. ambassador to Panama and the president of Panama as special guests, could be seen as a reflection of the country’s rising star. Called the “Latin Singapore” by The Economist in 2011, Panama has boomed as a commercial hotspot.
“Panama appeared to be our best bet for two different reasons. One, Panama has a very stable economy; they’re on the U.S. dollar, so there’s no currency fluctuations to deal with there. Their GDP growth has been phenomenal the past several years, and their projections far outweigh anything you see in North America,” says Geoff Ingles, director of real estate and international development for Wienerschnitzel. “From a logistical perspective and Panama’s trade agreement with the United States, it’s very easy to get product into Panama. It’s very easy to go through their trademark registration process.”
Slightly smaller than South Carolina, the Latin American nation lacks the size to compete with neighbors like Mexico, Brazil, and Chile in terms of agriculture and industry. Instead, Panama’s bread and butter lies in its ability to facilitate business, whether it’s by managing trade through its canal or fostering a robust banking sector. Panama’s historic role as an international trade route also minimizes would-be language barriers; although Spanish is the official language, Ingles says, English is always accessible.
He adds that Panama can be a good starting point for companies with little international experience or those seeking a gateway into Latin America. In fact, Wienerschnitzel did not begin looking into international expansion until about two years ago. Until then, the lone location beyond the continental U.S. was in the Guam airport. The brand held in-country meetings with prospective business partners who had gone through the onboarding process, and soon it was apparent that Panama was a top bet.
“I found Panama to be a very business-friendly and very pro-business country; you don’t have a lot of bureaucracy that you’ll find in some of these other countries. Speed to market is huge. You can register and be open within six months. Some of these other countries are 18 months to 24 months, just really ridiculous time frames,” Ingles says. “It’s almost like doing business in the U.S., but much more dynamic.”
In addition to its strong economy and friendly business climate, Panama’s location—at the base of Central America and connected to the top of South America—makes it an ideal training base as Wienerschnitzel expands to other countries in the region, he says.
For all the dangling incentives, Panama is a fiercely competitive market, and operators should be prepared to bring their A-game.
“You go down to Panama City, and you’ll see almost every U.S. brand walking down any street here in the U.S.,” Ingles says. “I think the market is probably going to reach some saturation at some point. There are a lot of burger guys down there right now. All the burger darlings in the U.S. want to be down in Panama and Central America.”
Specializing in a unique product—hot dogs in Wienerschnitzel’s case—could give operators an edge in this bustling market.
Qatar
brand:
Fatburger
When it comes to international expansion, Fatburger doesn’t flinch about entering markets that might scare away competitors. In August, the Beverly Hills, California–based brand opened its second Iraq location—this one in a new amusement park. It also has locations in Pakistan and Tunisia, and has development plans for Libya. In terms of more stable Middle East and North African markets, Fatburger has expanded to the United Arab Emirates (UAE) and Qatar. Not as well known as Dubai in the UAE, Qatar is also not as saturated with American brands, says Fatburger CEO Andy Wiederhorn. At least not yet.
“I think Qatar is trying to catch up with Dubai and Abu Dhabi. They’re a financially strong and stable country; they’ve invested heavily in their infrastructure and in their retail development,” Wiederhorn says. He adds that when Fatburger entered Dubai in 2007, there were only four better-burger brands; now there are 41. “Whatever brands are prominent in Dubai will also be prominent in Abu Dhabi and in Doha, [Qatar], over the coming year, without question.”
Last June, Fatburger opened the second of a five-unit deal in Qatar. Wiederhorn says those stores are doing twice the average unit volume.
Qatar is likely to become more prominent over the next decade. While the country did lose out to Japan to host the 2020 Olympics, it won the bid for the 2022 FIFA World Cup, making it the first Arab state to host the international soccer games. And according to NASDAQ, Qatar’s GDP per capita is by far the highest in the world, coming in at $105,091 in 2013.
Given such wealth, Wiederhorn says, brands must strike the right balance of price and quality. Many service workers in Qatar are foreign immigrants on short-term work visas; he says that even the least expensive of quick serves could be too expensive for these consumers. At the same time, traditional fast food might not appeal to Qatar residents.
“All of the brands should look at the Doha market as a good opportunity. I think there are different customer bases for each, but the [quick-service] brands will really have to focus on their food quality,” Wiederhorn says, adding that operators should also look to upscale their space. “You have to design your restaurants where customers can interact with one another as a family or as a group, not just take away. There’s plenty of delivery business, … but pure takeout and on the go is less.”
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Japan
brand:
The Pie Hole
Sean Brennan is hoping pie-and-coffee concept The Pie Hole will find success in Japan. The brand is slated to open the first of a 20-unit deal early this year, with the debut location in Tokyo.
Co-owner Brennan says that when the first location opened near Little Tokyo in downtown Los Angeles, Japanese and Japanese-American patrons had a natural affinity for the brand. He noticed a lot of free advertising in Japanese-language media for The Pie Hole and plenty of word-of-mouth referrals. Despite success with this consumer base, Brennan knew Japan itself was not an easy market to enter.
“Brands and products and culture don’t translate as well in Japan. Japan is a very specific marketplace, whereas if you’re looking at the Middle East and Europe, it’s a little bit more international,” Brennan says. “I think they have a really specific idea of what they want.”
The Pie Hole worked with a broker to help facilitate the deal with the franchisee, which also helped close any cultural gaps. It took a little more than a year to close the deal and vet each other: The Pie Hole learned how the concept would position itself in Japan while the franchisee became familiar with the brand itself.
“It was a learning experience from both sides. We really became a lot more confident that we would be successful in Japan,” Brennan says. “It really was a kind of symbiotic and natural fit for us.”
Although an economic powerhouse, the island nation is relatively secluded. However, it will be opening its doors to the world in a few years when Tokyo hosts the 2020 Olympics. Recent setbacks include the devastating 2011 Fukushima earthquake and lingering symptoms of intermittent recessions. Despite this, Japan remains the world’s third largest economy in terms of GDP not adjusted for inflation.
Brennan says that not only is the number of consumers quite high, but many of them also have a good deal of disposable income with Japan’s equivalent of U.S. Millennials spending much of their money in restaurants. A population of nearly 130 million also means that patrons are in need of space, so restaurants with enough space to host a gathering will find favor. And unlike the U.S., where people often eat a meal walking down the street or in the car, on-the-go noshing is something of a taboo in Japan. Instead of convenience, novelty and quality are more highly prized.
“If there’s something interesting or something that can be a conversation piece or just be very delicious, it really does well,” Brennan says. “Japan really likes American brands, especially … Californian brands—they represent something hip to them that they like, but they are very discerning. Many, many coffee shops and pastry shops in Japan have French pastry chefs, and it’s very high quality.”
Switzerland
brand:
Dunkin’ Donuts
America may run on Dunkin’, but the coffee-doughnut concept has enjoyed a presence in Europe for decades. Growth has since accelerated, and in September, the brand signed a 30-unit franchise deal that would put it in Switzerland for the first time ever.
“It’s a high-income market with a lot of disposable income and spending power. It is a market that’s seeing a lot of positive change, too, for brands like ours—more on the go from younger consumers in Switzerland, more openness to [quick-service] offerings,” says Jeremy Vitaro, vice president of international development for the brand. “Also, it’s a good market for both coffee and sweets and bakery, which are really the core of our menu.”
Ranked No. 9 on Forbes’ list of Best Countries for Business, Switzerland has a longstanding reputation for its robust banking sector and takes the top slot for trade freedom within that same list. Vitaro says that as the average Swiss citizen becomes increasingly busy—especially the younger generations—demand for quick food options should go up, too.
Compared with booming regions like the Middle East and Latin America, Europe may appear hampered in its capacity for foreign chain growth. The first wave of fast food saturated urban markets decades ago, making it harder for other brands to find their footing. Vitaro says he can understand how the news of faster growth in emerging markets could make Europe seem less appealing than it really is.
“For us, it’s been a great opportunity. It’s still a market with very high spending power, a really good openness to and knowledge of American brands,” Vitaro says.
Although Dunkin’ has had a limited presence in Spain and Germany for decades, it recently ramped up growth within those countries and expanded to new markets, including Austria, Demark, and Sweden. Vitaro says one crucial factor to the brand’s successful growth was its operation in Germany, where it built a regional supply chain, as well as local development, marketing, and operational teams.
“We made sure that we built up our support structure off of that base in Germany, and that’s not a quick or inexpensive proposition. But once you make that commitment and build that knowledge and the team, you can really leverage that as we have to continue the expansion,” Vitaro says. “No matter what you do, if you do set up a base and build from a strong core, that does give advantages to a brand in terms of support.”
And although Europe is host to a large number of languages and cultures in a condensed geographic region—Switzerland alone has four official languages—the European Union does help facilitate the flow of business and communication. By investing in its German operation, Dunkin’ Donuts set itself up for success in adjacent and other European countries. It also helped the brand familiarize itself with the business climate and therefore other operators and potential partners, whose role is invaluable to the success of the franchise.
“There certainly are complexities just by the fact that each country is different and the regulations are different and the language is different, and then of course, the consumer is different,” Vitaro says. Nevertheless, he adds that the link between the U.S. and Europe, the prevalence of English in business, and the overarching structure of the European Union help facilitate expansion within the continent. “It is a market where it is probably easier to do [business] than other places in the world where there may be more barriers or less flow across markets,” he says.
