Following comments on the Franchisor's perspective, the following are some thoughts on the Franchisee's perspective.
It is easier now than ever for a prospective UK franchisee to "think internationally" and consider potential franchise models from around the globe. If you can be the first franchisee in your home market, first mover advantage can be substantial and a successful business model in one territory can be a useful clue that it will work well in another.
However, going international as a franchisee has possible risks and costs associated, so what should you consider before partnering with an overseas franchisor?
Business Model & Franchisor's Track Record
The first test for any new franchise has to be whether the business model translates to your market. This is a particularly crucial question if you are to be the first franchisee in your territory.
You need to be confident not just that the business model will work, but that the support you are being offered by your franchisor is going to be useful to your particular market conditions. Marketing is a recurring challenge as there can be different cultures, besides languages, between markets, requiring adjustment of consumer communications.
Consider also whether your franchisor has experience expanding into other territories beyond their home market and assess your risk accordingly.
Choice of Law
The governing law of the franchise documentation you will be asked to sign is almost certainly going to be in the hands of your franchisor. Franchisors prefer what they know, so you may be asked to enter into contracts that are subject to overseas laws. That can work well where the franchisor has a tried and tested suite of documents, but you need to make sure you are comfortable with the obligations you are agreeing to. Do they legally (and literally) make sense in your market? Consider what advice you need to take in order to get comfortable. Will you need overseas advice? Beware terms that may be implied by the contract's governing law which may add to your risk.
Franchisees in the UK are fortunate to be in a leading legal jurisdiction, and one that translates well to others. If your franchisor is considering further international expansion, it can be worth exploring whether UK law governed documents would be possible. The earlier you can have these discussions the better, especially if you are lobbying for a change from their "normal" procedure.
Enforceability
Be aware that choice of law has significant bearing on enforceability. If you are relying on your franchisor for support, and that fails to arrive, consider how you can enforce your rights? If you have agreed, for example, to US law and US courts having jurisdiction, you will have a difficult (and potentially expensive) decision to make if you need to enforce those rights.
Language
The language of the contracts needs to be considered. If they are in a language with which you are not familiar, independent advice is all the more important. Translations add cost and meanings can sometimes get lost, don't hesitate to tackle this head on in discussions with your franchisor.
Consider also what day to day operations will look like. Who do you need to speak to at the franchisor, what information you need, and will you be able to understand it?
Currency
An inevitable consequence of trading internationally, franchise models are particularly vulnerable to currency fluctuations, where costs and fees are fixed over the long term. That can add upside as well as downside to your business plan, but make sure you know what both look like and seek flexibility in your contractual terms if possible. Both you and your franchisor want to be doing good, profitable, business in your jurisdiction, so allowing for variations in exchanges rates or local rates of inflation (particularly in longer term contracts) is in both parties' interests.
The above are just a few points to consider when considering international franchise opportunities as a prospective franchisee. The advantages of being the first in your market and partnering with an experienced franchisor can be huge, so for many franchisees, that extra cost and risk translates into greater reward.
Contributor
Senior Associate
