Article

International franchise expansion requires hefty work upfront

Domestic franchisors, whether running one location or 100 in the U.S., face a challenging journey in the quest to go international.

June 21, 2016 by Judy Mottl — Editor, RetailCustomerExperience.com & DigitalSignageToday.com

Domestic franchisors, whether running one location or 100 in the U.S., face a challenging journey in the quest to go international.

Expanding into a new country not only requires a strong business strategy but also involves a slew of legal steps and operations tasks from determining if the brand name is available to ensuring the new geographic site can support franchise requirements, according to Carl Zwisler, a principal at the legal firm Gray Plant Mooty. He and Attorney Jan Gilbert discussed international franchising during a panel session at last week's International Franchise Expo in New York City.

"The franchisor needs to have a global growth plan, establish a well-planned budget that encompasses everything from legal costs, local counsel, business registration to trademark registration as well as the travel back and forth in establishing the business," Zwisler said.

The lawyers said that a great deal of legal guidance is required in making an international move, especially if the language is different as translation costs regarding filings and contracts come into place.

"It's not just getting agreements but agreements in two languages that state the same thing," Zwisler said.

In addition to the legal and potential regulatory requirements, the issue of securing the supply chain also presents a challenge, including securing access to products and finding dependable freight.

"Importing products is very expensive; that all plays into the pricing model and the budget," Zwisler said.

Beyond legal issues and operational aspects, there's also the issue of hiring and training staff in the new country.

"Even the time zone of the new location presents a challenge for the U.S. franchisor," said Zwisler, noting that if the international store or restraurant needs support at 2 a.m. EST that needs to be part of the overall strategy. "Planning the plan takes time and resources," he said.

The decision of where to develop internationally requires answering a whole different slate of questions as well, said Gilbert, from determining the market potential and tax rate issues to currency issues and uncovering cultural norms.

Where to go

The U.S., U.K. and UAE are the easiest regions for franchise operations, and the most difficult areas are India, Brazil and China, according to a study the lawyers shared. Success is a possibility in all areas, however, if franchisors and franchisees view expansion efforts as a marriage; they must realize they're in it for the long term and that the first few years could be rocky.

"You're running a marathon, and you want to make sure your shoelaces are tied," said Gilbert.

About Judy Mottl

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Judy Mottl is editor of Retail Customer Experience and Digital Signage Today. She has decades of experience as a reporter, writer and editor covering technology and business for top media including AOL, InformationWeek, InternetNews and Food Truck Operator.

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