18/08/2008

Many franchisors are now looking to take their franchise systems to overseas markets.  If you are a franchisor considering expanding overseas, there are some initial steps you can take to prevent problems later down the track.

1.    Take the time to learn about your target country and its market.  Understand its laws, culture and customers.  Do your market research.  Is your franchise system likely to succeed in your target country?

2.    Learn about any import restrictions and duties that apply in your target country.  Some countries also have specific franchise laws as well as investment laws.

3.    Make sure you have the capital and human resources to take your franchise to your target country. 

4.    Ensure your intellectual property is protected in Australia and in your target country.  Most importantly, protect your trade mark!

5.    Consider using a local partner to help you with the local market.

When you have completed your research and made the decision to take your franchise system overseas and into your target county, you need to consider what type of legal structure will work for you.  There are a number of different legal structures to consider:

1.    Master Franchising.

You can appoint a master franchisee to become the franchisor for your target country.  The master franchisee will become responsible for the franchisees in the target country.

2.    Area Representative

You can appoint an area representative to find franchisees, train franchisees and support franchisees in your target country.  However you will remain the franchisor and enter into franchise agreements directly with the franchisees in your target country.

3.    Multiple Franchise Owner

You can appoint a multiple franchise owner as a franchisee within your target country and give the multiple franchise owner the right to expand the franchise system by opening further franchises within your target country. 

4.    Local Company

You can set up a local company in your target country.  This local company will act as the franchisor and enter into franchise agreements directly with the franchisees in your target country.  However, the local company may be required to have at least one director who is a resident of your target country. 

5.    Joint Venture Agreement

You can enter into a joint venture with a local investor in your target country.

6.    Branch Office

You can open a branch office and have an operational presence in your target country, without the need to set up a local entity.

7.    Direct Franchising

You can grant franchisee agreements directly from Australia to your franchisees in your target country.

For advice in relation to expanding your franchise system overseas, contact Townsends