Four Questions to Consider Before You Go International
Franchising World March 2011
By: Rosemarie Hartnett, CFE and Mary Rogers, CFE
Franchising and Licensing Asia, an annual international event held in Singapore, promotes entrepreneurship, business opportunities and intellectual property rights across the continent. Its October 2010 meeting reflected an Asian region open and enthusiastic about franchising. The event attracted 9,000 visitors from 39 countries, the United States being among its largest number of participants. The enthusiasm of American franchises to expand internationally is high, particularly in the Asian region, which shows strong signs of recovery from effects of the recent global economic crisis.
Small companies often venture into the international marketplace. It is often that spirit of adventure and a hearty can-do attitude that propels them to take a chance on these new frontiers. But is it really a good idea for your franchise? Here are four questions to consider before you jump in with two feet:
• Are you able to adequately protect your intellectual property? There is probably no place that you face a greater risk of having your intellectual property highjacked than several thousand miles away in a different culture with perhaps even a different language. How will you even know if this is happening? Are you prepared to protect and defend your IP if it is stolen? Anyone in the international marketplace will probably tell you that they have had a trademark stolen and held hostage or copyrighted content lifted and used illegally or a trademark registered without approval. You need to be prepared and ready to handle these problems, if they arise.
• Can you really support your international partners? International partners need a lot of help and support. Often there are language issues making training and support issues more challenging. Do you have the support services in place and functioning well enough to help support these investors in your concept? Then there are the inevitable time differences to consider. Do you have support team members who can work nights or early mornings to support international partners during their business hours?
• Do you really know who would make a great partner? Often, prospective international franchise owners seeking franchise rights approach smaller companies. But with just one or perhaps a few licenses to sell per country shouldn’t you be seeking the right partners instead of waiting for someone to knock on your door? First, you need to really consider the qualities and requirements that you are looking for in an international partner. Secondly, you’ll want to consider how you might find these great partners. And thirdly, once you locate what appears to be a suitable candidate, you’ll want to conduct thorough research to make sure that the candidate has the skills, background and resources to not only get the job done and but also work collaboratively with you and your team members.
• Are you prepared to comply with franchise regulations in other countries? As franchising grows and matures internationally, countries around the world have begun to regulate its expansion. Which country requires a disclosure document to be registered before a franchise agreement is executed? Do franchise documents need to be translated? Does the franchise company need to apply for the right to offer franchise opportunities as a foreign franchise? And what about the royalties? Emerging markets in the Asian region are often bound by government restrictions regarding the movement of currency outside its borders. Is there a restriction on the amount of royalty payments that can be paid to a foreign franchise?
It’s easy to be dazzled by the higher fees for international licenses, especially for a small company. But the reality is that the costs for helping international partners to be successful and to do it right are much higher than whatever you estimate. There are hosts of other issues to consider and so much to learn before you venture into this arena. These four questions are just a start, yet and as you can see, these four questions raise dozens of other issues to consider. So be a pioneer, but do your preparation up front and equip yourself with knowledge, resources, systems and a strong brand to increase your chances of success for both you and your prospective partners.
Rosemarie Hartnett, CFE is president and Mary Rogers, CFE, is CEO and both are co-founders of Abrakadoodle Remarkable Art and Creativity Programs, a franchise for children that has established international programs in Asia, including Singapore, Malaysia, Japan, China, Macau and Indonesia. Hartnett can be reached at email@example.com and Rogers at firstname.lastname@example.org or 703-860-6570.