When Janet Zuccarini and her team sought to extend the success of Gusto-54 south of the border, they were met with suspicion and skepticism. Felix Trattoria, the new restaurant from the founders of Toronto’s wildly successful Trattoria Nervosa and Gusto 101, hung its authentic Italian shingle in Venice, Calif., in April 2017. It’s a growing part of
Los Angeles that is protective against outsiders, says Juanita Dickson, president of the Gusto 54 Restaurant Group. Being a Canadian brand in a territory whose locals routinely shut down big-box retailers with boycotts, was a particular sensitivity. “They didn’t want foreign entities coming in,” says Dickson. “We had to be careful about creating a brand that felt like it had to be there.”
So goes just one of the considerations for this population of ambitious restaurateurs in their contemplation of international growth. Because, while expansion opportunities are richer than ever for franchised brands — thanks to the increased exposure to international cuisines technology and travel have facilitated — there’s no doubt the exercise is still fraught with perils. Think: legislation, regulations, political environment, rental costs, business practices, supply chains, socioeconomic conditions and so on.
“Canada is a finite market,” says Geoff Wilson, principal of Toronto-based fsStrategy Inc. That means successful operators need to decide whether to expend their energy growing inside Canada or outside it.”
The reality, Wilson says, is the former is typically easiest — but there’s no shortage of corporate exemplars who’ve had big success with the latter.
Companies considering this move, says Wilson — whether startups looking for adventure or mature operations whose shareholders want more growth — need to understand the breadth of the commitment. Overseas expansion requires established supply chains, an understanding of the local real-estate scene and an appreciation for the appetite in that market — all of which calls for significant market research.
“Do your research,” Wilson says. “That’s the lesson.”
The trick, say those with skin in the game, is to partner with people on the ground of the foreign markets, so they can bring local expertise to bear. “Moving overseas is no different than moving into Alberta or Missouri if you find the right partners,” says Michael F. Pandich, Jr., director of Global Franchise Development at Freshii, a 14-year-old Toronto-based brand whose hundreds of units are in 17 countries, including Ireland, Sweden, Kuwait and Australia. “You’ve got to live in the market where you run stores. You have to be part of the community to understand the market.”
When Matthew Corrin started the company, he didn’t intend to franchise and only went that route in response to demand. “We always start with the partner first and the market second,” says Pandich. Recently, a member of the Ecuadorian national cycling team ate at Freshii while attending a race in Toronto. A few months later, he opened the first store in Quito and today there are more than 10 units in Ecuador — one of the company’s fastest-growing markets.
The Middle East is another hot market for would-be Canadian expansionists, particularly Dubai — the current darling of Western brands. And, the current protectionist leanings of its administration notwithstanding, the U.S. is always on the table because of its size and proximity, which makes it’s easier for Canadian brands from brand-awareness, support-and-training and supply-chain points of view.
Beyond that, says Wilson, a hot market is simply one with a sufficient population base and an appetite for your concept such that “the going-in proposition is you can duplicate what you’ve done in Canada. Smaller countries might be fun and games, but if you can’t develop to your size in Canada, it’s pointless. It’s all about scale.”
Sometimes, ventures outside of the familiar require modifications to accommodate specific markets’ cultural or ethnic needs. At Freshii, an 80/20 rule ensures the bulk of the diverse menu is constant around the world — of the 20 per cent open to alteration, you’ll find such variations as Halal-certified proteins in the Middle East and plantain on the menu in Puerto Rico.
Late last year, Toronto-based restaurant group Kinka Family opened outposts of its Kinka Izakaya and Kinton Ramen concepts in South Korea. There, in Gangnam — Seoul’s trendiest district — it adjusted the broth in its Kinton Ramen dishes to favour the local preference for less salt. In Japan, it combined its sushi concept, JaBistro and its tapas/sharing concept, Kinka Izakaya, into Kinka Sushi Bar Izakaya, to differentiate itself from the glut of stand-alone sushi bars and izakayas. It also introduced lobster sashimi, a rare specialty in that country. The imported Nova-Scotia lobster makes a virtue of the company’s Canadian heritage, says John Tirch, Kinka Family’s vice-president of Operations for the U.S. “People know we’re not from Japan, so it’s a selling point to offer something they’re not familiar with and something we’re very proud of here in Canada.”
Sweet Jesus, which started as an experiment serving “hand-crafted, chef-inspired, pimped-out” soft-serve ice cream in downtown Toronto in 2015, had to change its very name for its entry into the Muslim-dominant Middle-Eastern markets. There, Sweet Salvation sells the company’s signature ice-cream products, updated in Dubai with a bespoke cone featuring the local flavours of saffron and pistachio.
Dubai is only one of the 50-plus countries across which Sweet Jesus currently sprinkles its 1,400 units. It’s been a great expansion story, says Jeff Young, president, Sweet Jesus, but not one without challenges. The biggest? Creating brand awareness in a foreign country. That’s where the global reach of social media kicks in. And, wherever possible, he urges operators to leverage global relationships with franchise partners. “For someone who owns the rights to Pinkberry in the Middle East, or Yogen Früz in Chile, Sweet Jesus would be a perfect add-on.”
Such consolidation is a trend that’s still on the ascent, says Young, with larger franchise groups acquiring and joining other franchise brands in droves. IFI purchased Sweet Jesus in November 2018, thus enhancing a portfolio of frozen-dessert brands that includes Yogen Früz, Swensen’s Ice Cream, Yeh! Yogurt and Yogurty’s. The synergies to be gained from franchisors developing multiple brands under a single portfolio include economies of scale and the ability to take advantage of the skillsets of the management team and franchisor.
Another challenge is overcoming the legislative differences that distinguish Canada from the rest of the world. For example, in the U.S. — which Young considers “the best market in the world for this brand”— some states have fastidious franchise legislation and some have none at all. Franchise disclosure documentation for the U.S. market is also unique from Canada. And the fragmented American banking system means “more of a challenge for a Canadian franchisee to get financing,” says Young.
But, if you can navigate the hoops, ingratiate yourself with the locals and take care not to get so enamoured with an international offshoot that you forget about your own backyard, cry the experienced voices, international expansion is where it’s at. Even if it takes some time, as it did for the Gusto 54 Restaurant Group and its American derivative, Felix Trattoria, recently named number-1 new restaurant in all of North America by Esquire and the first Canadian restaurant to be named a James Beard finalist for best new restaurant in America. “Now all of the banks are calling to say ‘can we fund your next project,’” says Dickson. “Where do you want to go next?”
Written by Laura Pratt