When an American based brand decides to start selling franchises internationally, there are a number of decisions that must be considered first. Because of the complexity of this significant business move, speak with an attorney about international franchising. Our team could address any questions you may have and explain what you should think about prior to expanding internationally.
Although not all countries have franchise laws as stringent as the United States, many countries have franchise relationship laws that must be complied with prior to offering or selling franchises in that country. Some of these laws may require a modified franchise disclosure document or no disclosure document at all. Many of these countries also require that the franchise agreement be translated into that countries native language. All of these aspects of franchising in a foreign country necessitate the need for an attorney in that country which, in turn, is accompanied by a legal bill. Franchisors looking to sell internationally should expect legal bills approximately the same as what it took them to franchise in the United States.
An important question to address before franchising internationally is whether there has there been any interest in the franchise from a specific country. Many brands started franchising in the United States because someone approached them with interest in buying a franchise. A franchisor may also ask themselves why expand into another country at this time, is there someone interested in purchasing the rights to the entire country, and is there a sales team capable of soliciting franchise sales in the country?
When mini brands franchise internationally, they do so under one of two circumstances. In one instance there is a brand that is well known throughout the United States and has saturated or almost completely saturated the United States and therefore expands internationally to broaden the global footprint of the business. On the other hand, a franchisor may have a business that is younger and has only a few locations within the United States, but was approached by somebody from a foreign country with interest in bringing that brand to their country. In the first instance, the franchise brand may be strong enough to stand on its own with possibly global recognition of the system name or logo. In the second instance the franchisor must understand that their brand may not be recognizable at all within that foreign country, and as a result, substantial marketing efforts may be necessary to grow the brand within that country. They may have to use tactics similar to those used in the United States when the brand was first franchised.
Although a trademark is federally registered in the United States, it may not have any protection in other countries. Before expanding a franchise to another country, a franchisor should retain an intellectual property attorney that is familiar with the laws of the country to determine whether a trademark is already registered in that country. If not, a franchisor may not be able to expand into that country using their existing trademark. Also, although a trademark may be available in that country, a franchisor should determine if their trademark is culturally appropriate within that country. Many words, phrases, logos, and images used within the United States may have secondary meanings in other countries or may be seen as derogatory or offensive. It is important to determine this before franchising internationally to avoid any public relations issues.
Although it is tempting to go into a foreign country to expand franchise sales and bring in more revenue, without a proper game plan for that expansion a franchisor could be wasting time and money. If you have more questions about franchising internationally, our team is here to help start this process.