When opening in a new market outside of the U.S., navigating the supply chain can be among the biggest—and lengthiest—struggles. Getting products in as well as dealing with the variation in the sales mix at overseas stores takes time and planning, says Gary Schwartz, director of international supply chain for Shake Shack. Having nimble partners to meet changes in demand based on what sells well in the new area is key, he says. RB spoke with seasoned operators to learn about setting up a reliable and cost-efficient supply chain. Here’s a look at the process, along with some tips and unexpected challenges to anticipate.
Step 1: Registration and securing importation license
Registration—or the process of becoming an importer so you can have products shipped from a stateside supplier—pairs with the need for an import license. To begin, operators need to work with suppliers to ensure all ingredients in products they plan to import meet local codes and requirements.
Hurdle: Each market has its own codes, Schwartz says, and some can get into extreme detail regarding the ingredients that go into products. For example, operators looking to expand in a Middle Eastern market may find their soy sauce banned if it contains trace amounts of alcohol.
Operators should anticipate four to six months on average to complete the process of registration and securing an import license, says Schwartz. And while the process gets less difficult over time, Schwartz notes that each new region presents its own challenges that will require its own solutions.
Step 2: Finding local sources
Procuring products locally reduces importation duties and fees, freight costs and lead time, says Marie Zhang, VP of international supply chain for Focus Brands. Zhang suggests developing a long-term local strategy that includes working with vendors to meet food safety, quality and consistency standards.
Idea: Have one or two semi-local backup vendors outside of the market, Zhang says, especially for critical products.
Step 3: Forecasting
Forecasting for a new country is a difficult task; lead times are longer, and there’s a lack of sales history. It is a complete guess, Schwartz says of opening a first restaurant in a new area, and operators should expect emergencies and unplanned write-offs at the beginning.
An item that does not sell well in the U.S. may be a hot seller in another market, and an item that’s expected to do well doesn’t always meet sales projections, says Schwartz. With sales history over time and the addition of comparable stores in the market, operators will be better equipped to forecast, he says.
Step 4: The shipments
Products sent overseas should have at least a one-year shelf life, Schwartz says, partially necessitated by long trips. And suppliers need to be able to accommodate. Shippers also play a critical role, as does maximizing space in every palate packed to be sent abroad. Operators should seek out shippers familiar with the documentation that’s required before products get on the boat, Schwartz says.
Hurdle: Operators want to negotiate a price break based on volume, but won’t immediately know what that volume will be. Schwartz has found that three to five units yield enough information to give a sense of what sells.