‘The world is not flat’: Irvine company charts cultural contours for U.S. firms expanding overseas
On any given day, you might find Bill Edwards traveling from Irvine to Mongolia. That’s where he helped set up outlets for Round Table Pizza, a California-based chain.
Or to Norway. That’s where he paved the way for Sky Zone, a fast-growing Los Angeles franchisor, to open an indoor trampoline park.Or to Turkey, Mexico, Brazil, Denmark, China or Japan – all places where he’s found partners for Build-a-Bear, the giant stuffed-animal workshop operator.
American brands are exploding overseas, and Edwards, chief executive of Irvine-based Edwards Global Services, is at the center of the action. With representatives in 32 countries, his firm is the largest U.S. consultancy in a niche market: helping franchisors go global.
“The world is not flat,” Edwards said, as he worked the crowd at a recent Costa Mesa export conference. “It has many cultures. We get paid for knowing how those cultures work.”
More than 1,300 American companies operate franchises. In the past three years, the 200 largest franchisors added four times more foreign units than they built domestically, according to the International Franchising Association, a Washington, D.C., trade group.
McDonald’s, KFC and other big chains have operated overseas for decades. Fees and royalties that international franchises return to the U.S. have doubled to more than $6 billion a year since 2006.
But smaller firms often don’t know how, or where, to start.
“Everyone wants to go global, but not everyone is equipped to do it,” said Lesley Hawks, Sky Zone’s vice president for global development.
That’s where Edwards and his colleagues come in.
After working for decades in Asia, Eastern Europe and the Middle East, first for U.S. oil companies and then for the printing franchisor Alpha Graphics, Edwards, 69, founded EGS in 2001.
His idea was to help franchisors that can’t afford in-house foreign expertise. Along the way, he landed big clients such as Denny’s, Arby’s, Build-a-Bear and Lawry’s, all seeking to expand in untested markets.
“Bill is a true internationalist,” said Jim Mayfield, director of the Irvine office of the U.S. Commercial Service, a federal agency that works with exporters.
Mayfield was stationed in Ho Chi Minh City, Vietnam, when he met Edwards six years ago. Edwards was helping Carl’s Jr. launch Vietnam’s first hamburger franchise.
“Franchising is not like exporting a physical widget in a box,” Mayfield said. “With a brand, you have to find the right partners around the world. A lot can go wrong if you are not familiar with local cultural norms.”
The complexity can be daunting. In the case of Carl’s Jr. in Vietnam, the issue became: Where’s the beef?
“It took a year to find food supplies that were consistently safe,” Edwards said. “Their cattle were too lean. And water buffalo don’t taste the same. We sourced out of Australia. That meant dealing with tariffs and cold storage.”
Burger chains also must adapt to local palates. Every Vietnamese restaurant has to serve noodles, Edwards said. “Brands say, ‘We don’t do pasta.’ We tell them, ‘Yes, you do!’”
In Europe, American companies are grappling with a backlash against genetically modified organisms. When International Dairy Queen opened in Poland, “they had to convert everything to non-GMO food,” Edwards said. “Even their packaging had to be non-GMO.”
Edwards helped Denny’s find franchisees in the United Arab Emirates, Turkey, the Philippines and Indonesia.
In Dubai, two Denny’s outlets opened last year with halal-certified fare, in keeping with Muslim tradition. Pork was out. Turkey bacon and veal sausage were in.
“Bill is very astute about the international market,” said Doug Wong, Denny’s senior director for global recruitment. “Originally, we were not looking at Indonesia or the Philippines. He said, ‘You should look at these guys.’”
At the U.S. Commercial Service’s Costa Mesa export conference, Edwards dissected foreign markets for a room full of Orange County executives.
“China, India and Indonesia are the global engines of consumer spending, with a middle- and upper-class population of more than 600 million,” he said, as he ran through slides showing Facebook users across the region.
“The amount of money these people spend is phenomenal. They want restaurants and shops. And they trust the quality of American brands more than they do local brands.”
Fast food and entertainment are popular, but senior care is expanding faster than any sector, Edwards said.
“Many countries have growing populations with Alzheimer’s and dementia,” he added. “And guess what? They haven’t planned for them.”
Edwards helped Omaha, Neb.-based Right at Home, one of the largest U.S. senior care providers, move into Canada, Mexico, Brazil, China, Australia and Ireland. Now he is consulting for Synergy HomeCare, a Phoenix-based franchisor.
Another client: Richmond, Va.-based Mosquito Squad, which sprays outdoor shrubs with pesticides. With 200 U.S. franchises, the company is looking to expand overseas where mosquitoes carry malaria, dengue fever and, now, the Zika virus.
“Their time has come,” Edwards said. “We’re working on a license for Southern Africa. We’re negotiating in three countries in the Americas and three in Southeast Asia.”
Edwards touts opportunities and, just as important, issues warnings. Register your basic trademark in countries you plan to target, he tells clients. Otherwise someone may steal your brand.
Due diligence on potential licensees is critical. “People aren’t always what they seem,” he said. “Who owns the company? Where is the capital coming from?”
That’s partly his company’s role, he said. “In every country, you have to be a detective.”
Even so, things can go wrong in a big way.
Three years ago, Rita’s Italian Ice, an Edwards client based in Philadelphia, shipped refrigerated containers of ice cream to the Chinese port of Shenzhen. Local officials “decided they didn’t want to let it in, even though it was pre-approved,” Edwards recalled. “We had grand openings scheduled, with TV coverage. The Chinese said they had to source the red food coloring locally – even though there was no supplier. So the containers sat for four months. Rita’s had to throw out tens of thousands of dollars worth of product.”
Some countries should be avoided. “We don’t go to places with ongoing wars like Ukraine, Syria or Iraq,” Edwards said. “Pakistan is too dangerous. In Russia, you can’t protect intellectual property. And Nigeria is too corrupt.”
But in most of the world, from Mongolia to Malaysia, Turkey to Thailand, Indonesia to India, the market for U.S. franchises is booming.
“Everyone is on the Internet,” Edwards said. “They know our brands. They love them. They want them.”