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Franchise Articles - International Franchising

Buying a Foreign Franchise Not Offered in Your Country

By: James Walker - Staff Writer for Red Hot Franchises.com

There are hundreds of systems in the franchise market that have yet to cross international borders. Many U.S. franchise opportunities may be thriving nationally but may not have been introduced into Canada or Europe.

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Franchise laws in the U.S. and Canada are quite similar, yet franchisors in the U.S. limit their expansion into Canada for a number of reasons — the most critical being the size of the market: the Canadian population is 1/10 of it’s U.S. counterpart. But it isn’t impossible to be the first franchisee of a foreign franchise concept.

Do Your Due Diligence

Regardless of the country of origin, any franchise opportunity should undergo thorough investigation, also known as the due diligence process.

Is there a demand for the concept in your country?

There is a very good chance that the opportunity you are interested in has a competitive concept in your country, but you should assess the concept beyond the “industry” level. A market research study can address and hopefully fill in the gaps of your franchise assessment. A franchise lawyer or consultant can also be an asset to your investigation. A concept that is too new or innovative may not be successful in a smaller market that lacks foreign influence and persuasion

Has the Foreign Franchise Assigned a Master Franchisee?

A master franchisee is the franchisor’s representative in a foreign country or market, responsible for expanding the system and overseeing operations on a large scale. Master franchises involve very large investments and can take years to get off the ground. In other words, you should enquire if a master franchise has been sold in your country because if it has, you are that much closer to owning one of the first franchises.

Prepare a Business Plan to Propose A Pilot Location

The legal requirements to sell franchises outside of the U.S. are much less stringent. Canadian franchise laws requires only three provinces require a disclosure document: Ontario, Alberta, and Prince Edward Island. If you want to propose a pilot or test location for the franchise concept, you should prepare a business plan to that effect. The franchisor may be willing to take the risk on one location if you are ready to be absorb most of this risk. This strategy may be more successful for young franchise concepts.

Negotiate Incentives

If you become the first franchisee in your country, the franchisor will be required to invest a lot of money to introduce the concept. It is in your best interest to negotiate mutually agreeable terms to lighten the financial load for your pilot location. The franchisor may be inclined to discount or waive the franchise fee. You may even have some control over sight location and other responsibilities usually undertaken by the franchisor