When considering moving a franchise overseas most firms first think of markets w
ID: 2428656 • Letter: W
Question
When considering moving a franchise overseas most firms first think of markets which are geographically and culturally close to home. For most American franchisors, for example, Canada is considered a good and safe bet. According to Entrepreneur magazine, the most popular franchise expansion locations for American companies are (in order): 1) Canada, 2) Western Europe, 3) Mexico, 4) Asia, Australia, New Zealand, and 5) South America. Increasingly major franchise opportunities are seen in emerging markets. One interesting case is that of Moran Family of Brands in Midlothian, Illinois. This Chicago area company franchises three types of automotive services and has sold their first international that will operate in Nigeria. Moran Family of Brands consists of the following franchises: Mr. Transmission, Milex Complete Auto Care, and Alta Mere. Mr. Transmission is a transmission repair and replacement service, Milex is a general automotive service center, and Alta Mere is a franchise providing automobile window tinting and alarms. Investors can choose to co-brand and include two or three units in their operations. Franchise information on the three options can be seen below:
Mr. Transmission
Total Franchise Investment = $ 173,000– 247,000
Franchise Fee = $ 30,000
Royalty Fee = 7%
Ad Royalty Fee = 1%
Total Franchisees = 100 approximately (down 11 units in the last three years)
Milex Complete Auto Care
Total Franchise Investment = $ 168,000– 251,000
Franchise Fee = $ 30,000
Royalty Fee = 7%
Ad Royalty Fee = 1%
Total Franchisees = 35 approximately
Alta Mere
Total Franchise Investment = $ 115,000– 196,000
Franchise Fee = $ 30,000– 35,000
Royalty Fee = 7%
Ad Royalty Fee = 1%
Total Franchisees = 12 approximately (down 2 units in the last three years)
Moran Family of Brands began construction on their first foreign facility in March, 2016 in Nigeria. The co-branded franchise of Mr. Transmission/ Milex was sold to a couple who will also attempt to develop the Moran franchise in Nigeria. Moran Family of Brands began its existence in 1958 when Dennis Moran began an automotive business. The company changed its name to Moran Industries in 1990 when it acquired Mr. Transmission, and further expansion led to the current name (Moran Family of Brands) in 2012. Moran Family of Brands has a management philosophy which states: We value initiative, creativity and an independent mind. We want team members that will question the wisdom of something they consider to be bad decisions. Some might challenge the choice of Nigeria as the first international location for the company. Nigeria, with a population of 158 million is Africa’s largest country. This oil-rich country in West Africa has a democratic form of government, however, the country has a long history of ethnic and religious conflict. Nigeria has gained the unwanted reputation of being a source of international fraud activity, and Transparency International ranks the country 136 out of 168 in terms of the most corrupt countries surveyed. GlobalEDGE gives Nigeria a grade of D (the lowest grade given) in terms of business climate stating: the business environment is very difficult; and the legal system makes debt collection very unpredictable. Nigeria receives a grade of C (second lowest) in terms of country risk with globalEDGE stating that Nigeria has: a very uncertain political and economic outlook. Undeterred, current president of Moran Family of Brands, Pete Baldine feels confident that Nigeria is the right choice for initial international expansion. Mr. Baldine thinks the franchisees are ideal choices for a franchise in Africa and he is looking for further expansion in other African countries, especially Liberia. Auto repair is not well developed in many African countries and he hopes to bring a degree of efficiency and superior service to these neglected markets. With declining franchisees in the US, Morgan Family of Brands hopes to find growth in emerging and frontier markets.
CASE DISCUSSION POINTS:
What problems may Moran Family of Brands experience by franchising in Nigeria?
Is franchising in general the best mode of entry into the Nigerian market? Explain.
In addition to Nigeria and Liberia, what other African countries might be good for Moran Family of Brands to explore? Are other areas of the world better choices for expansion?
Explanation / Answer
Moran Family of Brands may experience problems in Nigeria. The country has a long term ethnic and religious conflict. It is one of the most corrupt countries and thus the debt collection always become an issue. It has a very unstable political and economic environment which causes problems to carry out business.
Franchising is the best mode of entry into the Nigerian market. This is because standardised services can be ensured with franchising and thus there would be no question of conflict between the parties. Moreover the economy of Africa is growing and is thus an attractive option.
Kenya, Tanzania and Senegal are the African countries good for Moran Family of Brands in addition to Nigeria and Liberia.
Other areas of the world are already well saturated and thus there is not much growth opportunities available there. Moreover the economy of Africa is growing and is thus an attractive option for expansion.
Related Questions
drjack9650@gmail.com
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.