Why You Should Franchise Internationally
4 min read
If you are looking to reduce dependency on domestic demands, international franchising could be the best option. It’s a perfect way as globalization continues to make its way to the world’s great economy.
With the increased use of global brands, new technologies, and excellent visibility on the internet, it would be a perfect target market.
However, this doesn’t mean that the incentive should put you into franchising internationally without proper planning. You would be creating problems.
Franchising Internationally
In any franchise business, the most crucial factor to consider would be to review the Financial Disclosure Document and understand the fundamentals of international franchising.
You will be getting franchise rights from a franchisor. There will be use of corporate image, commercialization and use of any other authorized premises. This shows that the franchisor has powers. Contrary to the belief, before getting into the contract, you can choose to negotiate for better terms. You have to decide on what to negotiate in the agreement. But this is often successful with the help of an experienced franchise attorney.
The negotiations will be based on master franchise agreement. A master franchise has been one of the most employed business models for international franchise agreements. It best suits a franchisor as they get a quick brand expansion without any need for tiresome commitments of finances or even human support.
If you fail to negotiate the first agreement, it becomes complicated to agree with any other agreement in force.
A franchisor will allow you to exploit a given court with more rights to subfranchisees. One advantage is that you will have some independence as the franchisor is less involved.
As a master franchisee, you are obligated to understand any duty of your franchisor to other subfranchisees. This way, you oversee general development or operations on the country or territory you have a right to develop. Meaning, if a sub franchisee fails to perform, you will be responsible for ensuring they fulfill all the required obligations stipulate in the subfranchisees agreement.
Why You May Prefer International Franchising
There are many benefits why you should consider international master franchise. They include but are not limited to:
- A share of initial franchise fees:As a master franchise, you will enjoy a good percentage of the initial franchise fees. This may vary depending on the business model. You are also entitled to royalty fees. Typically, you have a right to operate or develop your own units.
- Expansion of franchise network:As a master franchisee, you are responsible for imploring subfranchisees in your territory. When done the right way, a master franchise proves to be the best and most effective way to expand a franchise network. This has its challenges. For instance, you may encounter an issue such as poor funding or even poor management.
For a better international franchising, one consideration would be your potential revenue streams. Though there is lots of promise in master franchising, its success is based on having an established firm base with careful planning.
Most of the mistakes are generally done during expansions, but such can be avoided with the proper legal representation.
Where there are operational intricacies, you don’t expect to flourish as a master franchisee. For instance, you would need to do your homework well to have a master’s franchise in hospitality care for the elderly. The reason, it you may need more cost of the establishment to ensure you attract a large number of subfranchisees to promote a perfect expansion.
Planning For International Franchising?
Due to the many risks involved in any franchise business, it’s vital to have a lawyer early. Franchising negotiations require that a lawyer advise avoiding potential franchising pitfalls.
A lawyer for international franchise litigation can help you determine the best opportunity to take depending on what industry interests you and what is available in the global market.
Remember that the entry of any new expansion will have its own challenges. You need someone who has the right skills to deal with the complexities.
Since a master franchise has powers to control the sub franchised business, the parent franchisor loses control over some part of the franchise dealings.
If you are a franchisee seeking to expand your business internationally, becoming a master franchisee will maximize your growth.
You can consider consulting a franchise attorney who understands the complexities of master franchising.
You will need to implement the terms and conditions stipulated in the sub franchising agreement to other subfranchisees. This way, you ensure not to lose your rights and potentially the units your franchisor may allocate to you.
If you are willing to work on overseas territories, this means that you reserve your ability to undertake all the obligations of the franchisor.
You will also need to report any breaches from subfranchisees to your parent franchisor. Any breach should be reported depending on how such default is likely to be cured. Some defaults are immediately cured, meaning as a master franchisee, you can move on without the franchisor’s interventions.
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