International Franchising

Having recently returned from developing franchise systems in Australia and Russia, Franchise Consultant Tony Urwin provides his thoughts on the issues involved when exporting a franchise from the UK

Before you contemplate offering your franchise opportunity overseas, the first thing you should do is ensure that your system is robust and operating well in the UK – it will not successfully export if it is not working in the first place.

Secondly, you should look at the culture of your target market. Is there actually a market at all for your products and services in the country?

If your franchise opportunity meets those two criteria, you should then decide how you want the franchise to operate in your country of choice.

You have three options here:

  • The Country Developer – The franchise owner will take the brand and be responsible for growing it throughout the country, in wholly owned units.
  • The Master Franchise – The Master Franchise Owner will establish the brand in that country through a pilot operation, and then sell sub-franchises there.
  • Individual Franchises – Sold and operated as a single unit.

Each method has benefits and drawbacks, which should be carefully considered before offering your franchise for sale in the target country.

By the time you are ready to consider your mode of operation, you should already have prepared an International Franchise Agreement, which will determine how you market the franchise. Entry to the country could require you to exhibit at a national exhibition, advertise in a national magazine or on a franchise website.

With a potential franchise owner identified, the next step is to invite them to visit your UK head office. I often stress to my clients that appointing a franchise owner is similar to appointing a Managing Director regarding the care they should take with the appointment.

In the case of an international franchise, it is even more important as you can’t just pop down the road to sort anything out. The international franchise owner will be looking to replicate your complete operation, not just that of a branch. So expect the appointment meeting to last for two, or even three days.

As soon as an applicant is identified, they will need to acquire a trademark. And once the applicant has indicated their wish to proceed and paid their deposit, you may wish to visit their territory and confirm that the location and staff are suitable. Training will take place at the UK head office with key personnel fully trained in the tasks they will be performing.

The Legal Agreement will be different from a UK agreement, as international agreements are often negotiated, not take-it-or-leave-it. Once negotiated, then signed, the required balance is paid before training commences.

For a Master Franchise, the Franchise Agreement will have to be modified in line with local laws, and a Franchise Disclosure Document (FDD) may need to be produced to allow the sale of the franchise into the territory. A further FDD would be needed to sub-franchise.

The franchisor should be prepared to support the launch of the business, where they will check the franchise is correctly set up and that reporting structures are in place. Following that, they should arrange to visit the territory at least once a year to maintain the relationship between themselves and the franchise owner; provide management consultancy and encouragement, and monitor the results.

This may all sound onerous... but we have done it; we know how to do it and we do it well. Contact Franchise Development Services and we will guide you through every step.