Why expanding internationally is not a ‘get rich quick scheme’

From left: Dagmar Boggs of Coca-Cola, Jim Bitticks, David Weston and Ray Blanchette. | Photo by W. Scott Mitchell Photography.

TGI Fridays signed its first international agreement in 1985, in the U.K. The first location opened the next year.

Profits? That would take some time.

“This is not a get-rich-quick scheme,” Ray Blanchette, CEO of the casual-dining chain, said at the Global Restaurant Leadership Conference in Barcelona this week. “I think we subsidized the international business for 15 years. We started in [1986] and first made money in 2000.”

Many different methods exist for expanding internationally. Companies can be more or less aggressive. They can try company-run locations or they can franchise. They can license, or use joint-venture partnerships. Some give local operators a lot of leeway on menu and other issues. Others insist on keeping things simple. 

But it’s clear that international development is not for the faint of heart. The burger chain Five Guys, for instance, can spend up to two years preparing its supply chain in certain markets to meet the demands of its owners. And it once walked away from a market, the Philippines, because it could not source the right potatoes for the chain’s fries. 

International markets can be alluring for their growth potential. It helps companies reduce reliance on the U.S., while providing a much larger and potentially more fruitful avenue for growth. 

Dave’s Hot Chicken, one of the country’s fastest-growing chains in recent years, has turned to international growth to maintain its expansion. The company opened in Canada in 2021 and has been increasingly aggressive across the Atlantic in places like the U.K. “The pressure is to keep growing,” Dave’s Hot Chicken President Jim Bitticks said. “So we’re looking at international development as our key growth vehicle going forward.” 

A lot of big brands are doing better internationally right now than they are in the U.S. Companies like McDonald’s, Starbucks, Taco Bell, KFC, Pizza Hut and others are generating stronger same-store sales internationally than they are in the U.S.

But these markets can be challenging. Consider China. Restaurant Brands International, which has typically done well growing brands outside the U.S., has had to engineer multiple deals for Burger King, Popeyes and Tim Hortons in China to speed growth in that market. Starbucks, too, just sold a majority stake in its China business. 

Thriving in these markets takes a lot of work. Companies spend a lot of time researching the business conditions, laws, trademarks and other issues in a new international market. Then they spend time on the supply chain, as the Five Guys story illustrates. 

Companies also do a lot of work to vet their international operating partners to make sure they are up to the task. 

Brinker International, the owner of Chili’s, takes an “opportunistic view” of international expansion, largely by finding the right partners and expanding in the markets where those partners operate. 

“We can be very picky,” said David Weston, VP of international and global development for Brinker. “You’ve got to have food-and-beverage experience. You’ve got to have a track record of operational consistency, operational excellence. If that’s the case, then we go to the next step, do I think the brand is viable in this market? Is the supply chain, infrastructure set up? Is there a labor pool? What’s the organization? You know, the economic profile of the country.”

That also includes making sure a brand can translate into an international market. Some operators will want to make changes in the brand, or too many changes to the menu. “When you buy a Chili’s, or you buy a TGI Fridays, you’re buying a brand,” Weston said. “So a brand has to translate, and it’s up to us to figure that out.”

Then there are issues with the menu. A lot of restaurant companies provide flexibility for local operators to tailor at least part of the menu for local tastes, some more than others. KFC, the third-largest international brand by sales, often looks very different from its domestic counterparts. 

Its Spain locations sell sandwiches and cheese bites featuring Monchitos, a puffed rice snack popular in the country. The sandwiches feature a purple bun, much like the snack’s purple monster mascot. 

Wendy’s operates with an 80-20 rule, or 80% core, 20% local. In some countries the company is trying fresh chicken, rather than frozen, and it is testing fresh tea. It is working with local suppliers to get that right. “One needs to be able to say globally great, locally even better,” Sean Muldoon, VP of international supply chain management for the Dublin, Ohio-based Wendy’s, said at the conference. 

Dairy Queen does not follow the 80-20 rule necessary but looks at its menu based on product categories. Its Blizzard treats can enable for a lot of flexibility in certain markets, as operators tailor flavors to local tastes. “You’re going to have the Oreo Blizzard as your highest mix in almost every market, and that’s expected,” said Greg Kirian, VP of global marketing for the Minneapolis-based chain. 

But the company also faces some supply chain challenges with its strategy, too. Dairy Queen wants to be quicker with menu innovation, to take advantage of consumer trends. 

“I think 10 years ago, you had the luxury of a pipeline that might be six to 12 months long,” Kirian said. “We’ve gotten our pipeline down to 10 [weeks]. And that creates some interesting challenges depending on the market. How do you get supply chain in lockstep with that? We want to make sure we’re not putting products out that fail. So how do you get a consumer reading quickly enough?”

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Restaurant Business Editor-in-Chief Jonathan Maze is a longtime industry journalist who writes about restaurant finance, mergers and acquisitions and the economy, with a particular focus on quick-service restaurants.

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