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International Franchising: Challenges of Going Global

Global franchise expansion is a natural evolution for businesses proven popular in their original markets. The International Franchise Association (IFA) cites three major regions as the best places for franchise international development: North America (Canada and Mexico), Western Europe and Latin America.

Although buying and starting a franchise in the US can be complex, the uniformity of laws, customs and language make it easier than launching a franchise in a foreign country. For one thing, laws vary from country to country on small business operation and franchise licensing.

Here a just a few differences in franchise law in different countries: * The disclosure acknowledgment and “cooling off” periods are longer in Australia than the US. * Brazil requires the Franchise Agreement be translated into Portuguese and registered with the Brazilian Patent and Trade Office. * There are special stipulations about terminating the Franchise Agreement in Mexico. * Spain imposes special registration laws applicable to franchises.

The IFA has a detailed guide to franchise laws in various countries at its web site:

Franchisors looking to expand into international markets typically start with Master or Area Developer License arrangements. A Master License allows an individual to sell franchisee rights within a fixed territory, such as an entire country. The Master Licensee in effect becomes the franchisor for that country and sells franchise licenses, for which the Master Licensee receives a portion of the fees. An Area Developer actually runs franchise units rather than sells licenses in an assigned territory; and must have substantial resources to invest, backed by business experience.

One new and increasingly used practice in international franchise development are “test periods” of one or two years, during which the franchisee operates as an Area Developer and must meet minimum unit openings and operation before advancing to a Master license.

Because there are diverse cultural, language and legal issues to address for international franchise development, franchisors look for certain qualifications in prospective franchisee candidates. Obviously, speaking the language is important. Individuals who already own or lease a potentially good location are also more likely to be awarded a franchise license. US Embassies in foreign countries have a commercial service that provides information to native residents about local business opportunities through American-owned companies.

There are many business consulting firms that specialize in helping prospective franchisees find the right international opportunity. These consultants can help the franchise understand and navigate through the legal requirements and local customs. You can find consultants for individual countries as well as larger international markets at this web page: Business Consultants

Check out international franchise opportunities at these upcoming expositions: September 28-29: Shanghai International Franchise Exposition October 8-9: 6th Annual Polish Franchise Exposition, Warsaw October 2-3: Franchise Association of India Convention & Expo, Mumbai October 10-17: IFA International Trade Mission to Australia: Melbourne and Sydney October 23-26: 13th Macao International Trade and Investment Fair October 23-24: Caribbean American Franchise Forum, Santo Domingo, DR November 5-6: International Symposium on Franchising, Los Angeles

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