A throng of U.S.-born restaurant concepts has spread around the globe, becoming some of the best-known international quick-service brands. But it’s interesting to consider the reasons some of these operations experience difficulty in converting beyond their domestic market and reinventing themselves overseas.
Certainly, within Europe, the types of locations that work successfully for restaurants often are very different from those in the United States. Successful restaurants in the United Kingdom and parts of Germany and France often are situated in densely populated areas and city-center locations and do not have the benefit of parking. The mall culture within many parts of Europe is not as well-developed as U.S. operators are used to, and a great deal of retail and leisure operations are located within city centers, where properties are not purpose-built and footprints are usually smaller. It is a common mistake for U.S. operators to seek property similar to that operated in the United States, and often the locations chosen simply are not strong enough.
Further, while there is great opportunity overseas, there also is risk, and several key factors can mean the difference between failure and success. Finding the right partners overseas can be a crucial decision, as is striking a menu balance between local tastes and brand staples, and understanding cultural nuances. For example, some U.S. restaurant chains had to modify their serving sizes because other cultures value smaller portions at competitive prices and perceive leftovers as wasteful.
Take McDonald’s, which has been said to be second only to religious institutions in terms of occupying the greatest number of top locations. Reinventing its brand for the preferences of the appropriate overseas region has been essential, as has been tailoring its international menu to regional customs. For instance, beer has been made available at its restaurants in France, Belgium, Germany and Austria. In Italy burgers are available with olive oil, Parmesan cheese and pancetta instead of bacon, which isn’t generally available there. French-speaking areas of Canada have the gravy-and-cheese-curd variation of French fries called poutine, and in Australia they offer Vegemite as a spread on bread.
In countries where religious doctrines restrict or forbid the use of beef, menu staples can be modified to use chicken or fish. In Muslim nations such as Pakistan and Indonesia, it helps to be certified halal. Likewise, entirely kosher American fast-food restaurants have opened in Israel and Argentina, barbecuing beef patties on charcoal instead of frying them, and fully separating dairy products from the meat — that means no cheeseburgers. When expanding in the Middle East, McDonald’s created the McArabia, which uses flatbread instead of a hamburger bun, and in Asian countries the sauces for Chicken McNuggets are varied to match traditionally East and South Asian sauces.
While McDonald’s may have world domination almost nailed, KFC has far surpassed McDonald’s in one major country — China. Both the Chinese and the Japanese have thoroughly embraced KFC, perhaps due to chicken being a staple of Chinese food to a greater extent than beef. KFC spent the early 21st century expanding tremendously, particularly in the Far East and Middle East.
More recently, Subway has expanded heavily into international markets, moving first into Saudi Arabia rather than Britain or the Far East. The chain offers kosher restaurants in Israel; halal menus in nearly every one of its restaurants in predominantly Muslim countries; and beef-free, pork-free and vegetarian products in India. While Subway allows its franchisees some liberty in tailoring the menu for their home countries, the basic menu is the same all over the world.
Since the recession began, foodservice has been recovering faster in many European Union countries than in the United States, making overseas expansion that much more appealing to many U.S. brands. Chipotle Mexican Grill is a terrific example. The Denver-based chain is about to open a sixth London restaurant close to our famous tennis ground, Wimbledon, in the first quarter of 2013. Chipotle opened three London sites in 2012 to join its first two in 2011 and has said it will continue its migration out of central London. Chipotle’s communications director Chris Arnold said, “Getting a toehold in Europe now allows us to introduce the Chipotle brand and begin to build the infrastructure we will need to grow in European markets.”
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Domino’s Pizza is another international brand aggressively expanding around the globe. On Sept. 24 it completed the acquisition of the business and assets of Domino’s Switzerland, adding 12 stores to the group’s portfolio and the exclusive rights to develop the market in Switzerland, Liechtenstein and Luxembourg. At the same time, it obtained the option to acquire Austria as a franchise territory, and this option runs until the end of 2014.
We believe the next U.S. concept to make a play over here will be Five Guys Burgers and Fries. Having topped the latest poll from Market Force Information as the United States’ most popular burger concept and as having the best-tasting burger, the company now has its eye on launching in the United Kingdom. With gourmet and better-burger concepts growing in popularity around the world and particularly across Europe, perhaps we’ll also start to see some of America’s other admired burger chains, like In-N-Out, Fuddruckers, A&W and Smashburger, the remainder of the poll’s top five.
The British media regularly gets excited about the prospect of U.S. chains coming to the United Kingdom, but the success rate for anything other than fast-food brands is poor — with the exception of T.G.I. Friday’s.
Finding the right partners overseas has been prohibitive for many brands looking to expand internationally, including those in the United Kingdom looking to enter the U.S. market. Coffer Corporate Leisure does much work in this field, assisting optimistic restaurant entrepreneurs with international ambitions looking for investment backing.
U.K. chain Wagamama is a case in point, sold for $350 million to Duke Street Capital in the biggest U.K. restaurant M&A deal of last year. Wagamama has successfully cut it on the international stage and is now in 17 countries. Following its takeover the group announced plans to ramp up its expansion at a rate of 20 sites per year.
Finding a partner is not easy. Many potential franchisees take a good look at the United Kingdom, in particular, but fail to acquire sites simply because of a lack of track record. The partner needs not only to have financial muscle but also site-finding and operational skills.
Before making final decisions on prices, sizes or other characteristics of your products and services, an adaptation of those products and services based on sensitivities to different tastes, cultures, norms and trends in a country is important. But at the same time, the operators who have enjoyed the greatest successes have remained true to the products and services that demonstrate the quality, integrity, uniformity and consistency of their brands.
David Coffer is chairman of London-based The Coffer Group, a 40-year-old consulting firm specializing in the leisure sector and comprising Davis Coffer Lyons, Coffer Corporate Leisure, Coffer Hotels and Coffer Leisure Investment Advisory.
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