How to Prepare a Franchise Business for International Expansion

International franchising is a good way to expand a local franchise internationally while maintaining control of the brand and products. However, the success of an international franchise depends on the approach taken.

Without legal knowledge, exploring the global market can be challenging. Fortunately, a skilled franchise agreement lawyer can help you navigate this process and avoid legal challenges.

Steps to Take

1. The Starting Point

The franchisor should analyze their business to determine if it can thrive or succeed internationally. While the business may be thriving locally, it may be lacking international potential. Finding a target market that works for your business is key. With over 200 countries worldwide, you can't miss a good starting point.

A skilled franchise consultant can evaluate your business and advise whether it's ready to go international. The evaluation will reveal whether your business provides a solution for the target market's particular needs. If your business idea can be replicated in the target location, you'll likely succeed in that country.

2. Trademark Registration

It's time to register a trademark after finding a target market. Many trademarks are registered in one country—where the business operates. This is understandable because most businesses start in one country before going international. Registering a trademark is a standard requirement when expanding your company. The registration should start early because the process can take time to complete.

3. Preparing for Internationalization

Most companies typically have operating and training manuals in their native language. However, they should be translated into the language of the target country or English. English is a preferred international language because it's spoken in most countries.

The translation process allows you to scrutinize your documents and correct any errors. You should carefully analyze your documents to determine if your terms work in the target country. Cultural differences and habits between your country and the target country can limit the terms and conditions of a franchise.

4. Market Strategy

It would be best to have a good market strategy before expanding abroad. The following three factors come into play when finding a good market strategy:

Distance

The distance between the mother company and the new outlet should be considered. Why is this distance important? Knowing the distance can help franchisors answer the following questions:

• Can I deliver my products and services or not? 
• Can I control and train franchisees from my location? 
• Can I travel to review the new outlet without challenges?

It's also important to consider geographical and cultural aspects, as aforementioned.

Size of the market

For a smaller country or markets with limited potential, the best strategy would be to find an established local partner who can act on your behalf.  On the other hand, you'll require proper planning in bigger countries or markets with higher potential. For instance, franchisees in such markets require more support because the outlet is likely to grow fast.

Financial Strategy 

How will you organize your international finance strategy? Will you be selling your business concept? Are you looking at a one-time payment or collecting ongoing royalties? Will you be selling physical products to the franchisee? It's advisable to establish a direct franchise if the market is small and have someone to supervise an entire region if the market is big.

5. Preparing an International Finance Contract and Model

Developing a finance model is not easy. For regular franchises, the agreement is only between the franchisor and the franchisee. For an international franchise with a master franchisee, it’s not always easy because you have to divide profits between the three parties.

A good franchise contract or agreement should be clear and understandable by both parties. Also, the agreement should specify the legislative jurisdiction of the contract. Unfortunately, most franchisors pick what favors them rather than the option that works for both parties. 

6. Recruitment of a Prospective Franchisee

When you're done with the formalities, you can begin the recruitment of potential partners. Recruiting a local franchisee is easier because the business is already known to investors who know that the concept works. 

On the other hand, recruiting a franchisee in a foreign country can be complicated because of low brand awareness among potential investors. You must work harder to attract potential investors who can grow the business to the next level. 

7. Starting the Business

Training is key when expanding your franchise business. In both local and international franchising, training should be divided into two parts:

General Training 

General training helps the franchisee understand your business concept; what the business is all about.

Operational Training 

This training helps the franchisee understand the ins and outs and the daily processes of the business. 

With the right approach, franchise businesses can successfully conquer the international market. This article is a great guide if you're considering international franchising.