INTERNATIONAL EXPANSION - IS YOUR FRANCHISE BUSINESS READY?

Katarina Klaric - Stephens Lawyers & Consultants, Melbourne, Australia.

Is your franchise business ready to go international now?

Successful international expansion of a franchise system can be rewarding and result in business growth and profits. However the process is complex and demanding, and may not suit every company. An "ad hoc" decision to expand overseas, without careful planning, assessment and understanding of the market and its regulatory systems, could potentially destroy the Australian operations. If you are considering international expansion of your franchise business, the checklist below is a useful starting point for assessing whether you and your franchise business are ready to export.

  • Does your franchise involve competitive products or services which can be easily adapted for supply, or be supplied into overseas markets?
  • Is your existing production capacity sufficient to support overseas generated sales, or do you need to expand in order to export?
  • Do you have sufficient personnel to provide any training, documentation and support required to operate the franchise system in offshore markets, or do you need to expand?
  • Do you have sufficient capital, cash flow or access to finance over an extended period (3-5 years) to support the additional costs involved to export or expand overseas?
  • Are your Board, CEO and management team committed to overseas expansion?
  • Do you have the time to undertake market assessment and development work required for expansion including travelling and visiting the target markets?
  • Do you have existing staff with expertise in export and international business, or will you have to hire new staff or engage external consultants?
  • Do you have an International Business Development and Marketing Plan?
  • Have you identified potential export markets and undertaken market assessments?
  • Have you undertaken an assessment of the investment required to expand in the target markets and forecast financial returns? Does the investment equate to increased profits?
  • Have you identified your intellectual property assets to be exposed in the target markets (trademarks, brand names, logos, domain names, copyright, designs, patents, confidential information and trade secrets) - and have you checked that your trademarks, brand names, or logos do not have negative meanings in an overseas market?
  • Have you undertaken searches to ensure that you can market, sell or otherwise distribute your product without infringing third party intellectual property rights?
  • Have you registered or otherwise protected your intellectual property in the proposed markets?
  • Have you assessed the most effective method of structuring your operations in the proposed markets and ensured protection of your Australian operation?
  • Do you have confidentiality and/or non disclosure agreements ready to approach potential channel partners?
  • Do you have the necessary permits, licenses and clearances to market, sell or otherwise distribute your product?
  • Do your products comply with local manufacturing standards and requirements?
  • Do your products' labelling, packaging, advertising and marketing materials comply with local law?
  • If you are proposing to use existing Australian supply or other agreements, have they been reviewed and adapted to comply with local law?
  • Appropriate due diligence will have to be undertaken when Australian companies are partnering or considering other types of relationships with overseas companies for their expansion.

If you have answered "yes" to most of these questions, your franchise business has a strong foundation in place for successful overseas expansion.

There are a number of different options available for international franchising expansion, including:

  • Set up a branch office or subsidiary company to develop and operate the franchise system
  • Grant an area or master franchise in the area
  • Grant licenses of franchises direct to franchises in the area
  • Enter into joint venture agreements or partnerships with local companies

The vehicle ultimately chosen to expand your operations will be influenced by a number of factors, including:

  • The Franchisor's financial resources and personnel levels
  • The refinements required to adapt the franchise system to suit the overseas market
  • Economic and financial incentives offered to foreign investors
  • Taxation issues
  • The local regulatory or legal system
  • The franchisor's overall aims, goals and expectations for the local market

Stephens Lawyers & Consultants can assist you with developing and implementing strategies to enable you to achieve this business goal. We represent leading international businesses and have over 20 years' experience in international trade.

To register for newsletter updates and to send your comments and feedback, please email stephens@stephens.com.au

For information relating to expansion in China, please see: "Commercial Franchising in China"

Disclaimer : This article is not intended to be a substitute for obtaining legal advice

Contact:

Katarina Klaric

Stephens Lawyers & Consultants

Level 3, 530 Lonsdale Street

Melbourne Vic Australia 3000

PO Box 13286 Melbourne Law Courts

Melbourne Vic 3000 Tel: +613 8636 9100 Fax: +613 8636 9199

Email: katarina.klaric@stephens.com.au

Web: www.stephens.com.au

© Stephens Lawyers & Consultants, June 2007 - 2010.

Updated July 2010.