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Franchising Internationally

Posted by Carolyn Dufton on 14 October 2010
Franchising Internationally

Expanding a franchised business overseas is a natural progression for many entrepreneurial franchisors. For others, it is a concept that is considered too high risk to consider.

So let's explore the concept of expanding overseas.

Firstly, before even considering overseas, a Franchisor needs to be confident that the franchise business model is working efficiently, effectively and profitably. A business that is not performing well in its own country is highly unlikely to perform any better internationally!

Why would you consider expanding internationally?

It's essential to have identified and thoroughly examined the objective and anticipated outcome for expanding the business overseas.

Some reasons for expanding overseas may include;

  • Demonstrated interest from a party overseas
  • International distribution of an existing product under a franchised system.
  • The desire to do business in a specific country due to family/friend ties.
  • The sheer challenge of it!
  • Limited home market
  • Research identifies that your product/service would perform well in specific overseas markets.

What to do next?

Just as you should develop any new business idea with a written business plan, expanding overseas deserves the same attention.

A proven concept in one country does not guarantee success in another.

  • Prepare a thorough business plan on the concept of overseas franchising.
  • The business plan should incorporate a well thought out SWOT analysis.
  • Spend time and research developing a budget. Overseas franchising does not come cheap!
  • Identify the countries that you would target for expansion in order of appeal.
  • This should be done with assistance from local professionals in the countries of your choice who have "local knowledge". Be prepared to spend money on researching local markets.
  • Consider opening a flagship company operation in the country of your choice. This could be a lot cheaper than starting a franchise operation from scratch. This is a great way of learning about business trends in your "new country".

This is no different to having piloted a business prior to franchising.

  • Register a trademark in the country of choice.  See below for more on overseas trademarking

What not to do

  • Rush in without due consideration.
  • Underestimate the cost.
  • "Do it on your own." Consult with experts.
  • Expand overseas for the "sake of it" or the "kudos".
  • Underestimate the ongoing involvement in an overseas business
  • Abdicate from the overseas operation because of distance
  • Operate overseas without involving the local people.

Overseas trademarking

  • The Madrid System for the International Registration of Marks ("Madrid Protocol") and the Paris Convention for the Protection of Industrial Property ("Paris Convention") are two very important international treaties regarding the registration of trade marks.
  • The Madrid Protocol provides a one-stop filing system so that the franchisor can file for trade mark protection in their own country as well as  targeted countries at the same time. It does not give you an international trade mark that is recognised by all its member states or all countries across the globe, but does provide the convenience of filing in different countries at one go and also reduces the costs of filing.

http://www.ipaustralia.gov.au/trademarks/international_index.shtml

  • The Paris Convention provides a very useful mechanism allowing the franchisor to file the trade mark in their home country first at an earlier date and subsequently, within a given time frame, when they decide to file the trade mark in the targeted country, they are able to claim priority or use the first and earlier filing date in their own country as the date of filing in the targeted country. The Paris Convention gives the franchisor time to source for funds before filing for trade mark protection in the targeted countries and the peace of mind that comes with knowing that they can be protected by filing first in their home country.

   http://www.ipaustralia.gov.au/resources/international_agreements.shtml#paris

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Author: Carolyn Dufton
About: Carolyn Dufton Dip. Bus (Franchising) heads the team as the owner and manager of franchisingplus. Carolyn has a wealth of small business experience, and many years of hands on franchising experience.
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