International Restaurant Expansion: Facing the Challenges to Reap the Benefits

Foodservice brands, especially those in the fast food industry, have been facing flattening growth in the United States.  As the domestic market becomes increasingly saturated and as domestic consumers turn to being more health conscious, foodservice brands have looked to grow internationally. Many global locations remain untapped and contain countless opportunities for significant growth. Companies including Burger King, Yum! Brands, Inc. and Starbucks have embraced these opportunities, and others continue to follow.

Growing internationally, however, has its obstacles. It takes time and patience and companies face challenges that they may not experience in the United States.
  • Supply Chain Uncertainty: Supply chain bottlenecks are one example. Companies need to evaluate whether ingredients can be sourced locally and if the ingredients meet quality standards. If not they may need to be imported which can be costly.

Currency fluctuations, tariffs and political instability in some regions can also lead to an element of unpredictability including unexpected closures. In certain areas of Central America or the Middle East, armed security guards may need to be hired. Government regulations and legal restrictions also vary from country to country. Some countries may not even recognize franchises as a business model. Obtaining financing internationally and finding the right location to rent can also be tricky and expensive.
  • Hiring Obstacles: Companies looking to expand internationally further need to understand the local labor laws and finding the right people to hire may be difficult. Companies not only seek to hire people that live in the area where the restaurant will be open  but also want to hire those who embody the values of the American company and can also speak English. The restaurant look and feel also needs to combine the American brand experience along with the local demands.
  • Cultural Considerations: Local cultural and religious beliefs should also be factored. Companies cannot expect to use the same menu that they do in the United States, but instead must tailor the menus to meet differences in customer tastes, which vary from geographic locale. For example in India, beef is not eaten by many customers, but restaurants often do choose to increase the spiciness of its foods. Customers in India may also expect there to be a separate food preparation and service counter for the sale of vegetarian items from beef and pork. In China, the McDonald’s restaurants sell taro pie rather than apple pie to meet local preferences.    Menus also need to cater to the local language and often include more colorful pictures. In some regions such as Central America, customers generally do not bus their own tables and thus additional workers are needed to meet this demand.
Companies who recognize these challenges and are prepared to address them before entering into a new market will open themselves to the benefits of international expansion. Even though restaurants face increasing competition as more restaurant brands look to open globally, new restaurant openings will continue to occur especially in areas with developing economies and a growing middle class.

What challenges do you see for restaurants looking to expand internationally?