The European Franchise Federation (EFF) has agreed to propose to its 17 member associations around Europe the adoption of British ideas for the voluntary regulation of companies expanding internationally through franchising.
The British proposals will prevent the sale of unit franchises to ordinary investors in a new territory, unless the international franchisor or their Master Franchisee is taking responsibility for the adaptation of the business to the new territory.
British Franchise Association (bfa) Director General Brian Smart says: "We will ordinarily expect a network expanding across country borders through franchising to pilot the business in the new territory before selling unit franchises. However, the very 'light' approach taken in the voluntary regulation which EFF Members are being invited to adopt as guidance for a trial period, only requires that the responsibility for the adaptation of the business to the new territory should be taken by someone other than an unqualified unit franchisee."
There are already mandatory requirements for international businesses to pilot their concepts in several countries around the world including Italy and most recently China. Britain is a natural first target for international franchisors originating in English speaking countries and the UK has suffered more than its fair share of overseas franchised businesses which have discovered that they need substantial modification for the UK only after unit franchises have been sold and failed. The reality, according to the bfa, is that piloting is just as necessary a precursor to franchising in a new territory as it was in the original territory where the concept was developed.
The British have been promoting a voluntary approach to the problems of international piloting through the World Franchise Council as well as the European Franchise Federation.
Brian Smart adds: "We continue to work with our international colleagues to see what kind of approach to international piloting can be agreed around the world. We want our UK franchisors to take a responsible approach to franchising internationally and we will seek to see to it that our overseas colleagues take the same approach when they come to the UK. A worldwide agreement on the best way to get this right would be the simplest way to secure an even playing field for franchisors around the world. It will also be the best way to ensure that legislators, faced with instances of failure, do not intervene with crude and penal requirements on international franchisors."
For a copy of the EFF Principles of Adoption paper on 'The Development of Franchised Businesses into New Territories', contact the bfa at email@example.com.
Published: 13 June 2006
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