International franchising is a modern strategic way to reduce their dependence on domestic demand and grow new future revenue and profit centers on a global platform. When we extend a brand globally through franchising it involves low risk and requires minimal investment and offers a huge upside potential for scaling capabilities. Franchising is where we pool our resources and capabilities to accomplish a strategic marketing distribution and reach the sales goal of a company. It typically involves a franchisor who give grants to an individual or company or the right to run a business selling a product or service under the umbrella of franchisor’s successful business model which are identified by franchisor’s trademark or brand.
There are several benefits international franchising like International customers/clients, international market knowledge and along with this, it will be a brand recognition in the International market. We can give our franchisee to foreign master franchise owners who have a certain defined geographic area or sometimes a whole country wherein they make the sub-franchisee or franchisee work
There are five ways in which a franchise system can be expanded overseas:
1. The franchisor either from its “home” headquarters or from a foreign branch operation grants an individual franchise to franchisees in the target countries.
2. The franchisor establishes a subsidiary in the target countries and these subsidiaries acts as the franchisor.
3. A joint venture is established between the franchisor and third party with knowledge of the target countries. This joint venture will act as the franchisor in the target countries and may be granted with a master franchise agreement.
4. The franchisor enters into a master franchise agreement with the one who wants to open franchise
5. The franchisor enters into a development agreement with the franchise.
Apart from the master franchise and development agreements, there are a number of alternative structures, which may be relevant to open international franchises:
• IP Rights
Intellectual property rights say that a right which is applicable in a country or region is applicable in that country or region. When a franchisor plans to go to global market they has to register their trademark, their logo in the international market.
• Laws that Apply to Franchising
Many of the countries do not have laws on franchising so their laws need to be revised for the betterment of employment and the protection of franchisor.
• Franchise disclosure laws
Some countries have disclosure laws which need to be known before signing any agreement.
• Registration requirements
In some countries, the franchise agreement and other documents have to be registered with the government body.
• Competition laws
Generally, franchise agreements are subject to competition laws.
- There are certain troubles in franchising like
- Many a times success don’t come early in our path as compared to single owned business.
- The franchisor brand may not always benefit the business
- Sole sources of goods and equipment may be costly
- Some franchisers don’t even care about the success of the brand
Like any business deal, a thorough analysis of issues is likely to arise in the in any franchise business so we have to take the measures and should be precautionary while going global in the market. One can also contact the international franchisee lawyer for assistance and handling all the legal intricacies.