Introduction
A company’s primary goal is to grow and develop to expand its profit scale. An example of expansion leading to significant profits is Domino’s, which is the second-largest pizza chain in America. To develop its business, Domino’s employs a strategy of franchising, building new stores, and reimagining existing ones. The effectiveness of the methods used to grow globally demonstrates that Domino’s is the right path for other companies to follow.
Criteria for Selecting New International Markets
An approach of a company like Domino’s to globalizing its products depends on the markets it has access to. A company’s primary concern when expanding is determining whether the market in a given country is receptive to its product. For example, Domino’s recent ambition to expand into Italy has failed, with its franchise there closing in July 2022. This was a direct result of underestimating the competition created by a partnership between local restaurants and food delivery services (Ruotolo & Cooban, 2022). Therefore, a company of Domino’s size and affluence should primarily focus on market and competition research.
The Franchise Model as a Strategy for Global Expansion
In addition, a company that favors franchising needs to place a particular emphasis on the country’s talent pool. First and foremost, an establishment would require a legal advisor experienced with the country’s legislation. Second, the firm would need to acquire talented, committed employees at all levels of the franchise’s hierarchy. The workers need to be experienced, motivated, and well-credentialed for the new venture to succeed. The acquisition of talent is where the franchise approach shines, as it is tough to understand where to look for workers and which pitfalls to avoid in a foreign employment market.
Franchise-Owned vs. Company-Owned Approaches
As stated above, the franchise approach enables the delegation of essential tasks to professionals who are better equipped to handle the specific geographical area. Matters related to profits and losses, employee hiring and firing, and other issues would be handled on-site by the franchise representatives. Additionally, franchising offers a risk-free investment model, in which franchisors receive upfront fees, enabling them to retain capital (Home Franchise Concepts, 2022). However, a measure of control would have to be sacrificed. For example, non-franchised businesses can make decisions about store locations and marketing without significant pushback.
Furthermore, not opting to franchise exposes the company to the risk of becoming a corporation. Corporations have several significant advantages over franchises that need to be considered. For example, personal liability protection allows shareholders to avoid being personally responsible for corporate debts.
The next advantage is the flexibility of ownership transfer and the ability to perpetuate the business long-term. Since most corporations can raise funds through the sale of publicly traded stock, they can easily sell their own. Additionally, depending on a corporation’s structure, certain entities may be eligible for tax benefits. The ease with which ownership can be transferred and capital raised provides the company with security amid various crises.
Conclusion
In conclusion, the strategy that the Domino’s Pizza chain has devised for its global expansion is efficient and profitable. For companies, it is essential to remember key elements of successful growth, such as market research and talent acquisition, which franchising ideally enables. Both franchises and corporations have their advantages and disadvantages, including levels of control, capital flow, and shareholder protection.
References
Home Franchise Concepts. (2022). Franchise vs. corporation: Pros & cons, difference & similarities.
Ruotolo, N. & Cooban, A. (2022). Domino’s tried to sell pizza to Italians. It failed. CNN Business.