INTERNATIONAL

• Hiring and dealing with local legal counsel in the relevant country.
• Modifying standard U.S. agreements for use in foreign countries.
• Understanding the different legal and business environments involved in international franchising.
• Conducting due diligence investigations of potential foreign business partners.
• Merging with or buying foreign franchise systems.

• The franchisor needs to protect his intellectual property in the foreign country. U.S. trademark registration is not much help beyond U.S. borders. A franchisor should explore international trademark registration as soon as possible in the process.
• The franchisor needs to conduct a due diligence investigation of the international business partner in order to comply with the U.S. Patriot Act.
• The franchisor needs to select the structure of the business relationship with the third party. The most common relationship in international franchising is the master franchise arrangement, where the third party acts as a sub-franchisor in the country. But there are other types of possible arrangements such as direct franchising, international subsidiaries and international joint ventures, each of which has its own advantages and disadvantages. Local law in the relevant country and the applicable international tax treaties should be considered.
• The franchisor needs to select and hire competent local legal counsel in the relevant country. This lawyer will help guide through the process of complying with all of the applicable legal requirements for doing business in the relevant country.
• The franchisor needs to modify the existing U.S. franchise documents for use in the foreign country. This may include translating your documents into a foreign language and preparing a franchise offering circular in a different format than the standard UFOC format. The franchisor may also need to register the franchise with certain foreign governmental offices (and some countries require governmental approval of each franchise agreement).
• The franchisor needs to consider how the franchisees will be trained, monitored and supported in other countries.
• In a master franchise arrangement, the U.S. franchisor gives the foreign master franchisor the right to use the marks and the system in connection with franchising in a particular territory for a certain period of time.
• In that territory, the master franchisor will act as the franchisor.
• It will typically be responsible for developing leads for qualified franchisee prospects for signing the franchise agreements, training new franchisees, collecting fees from franchisees in the territory, and monitoring franchisee compliance with system standards.
• The master franchisor usually pays a portion of its revenues to the franchisor as royalties. They may be required to open company-owned units and/or to develop a certain number of franchised units according to an agreed-upon development schedule.

• The master franchisor or its owners are typically natives of the foreign country and are very familiar with the language and culture of that country.
• The master franchisor may also have helpful business experience, business contacts and government contacts in the relevant country.
• The master franchisor in the country can provide training and support to franchisees easier than the U.S. franchisor.
• The burden of translating all franchise materials can be shifted to the master franchisor.
• The burden of complying with the applicable foreign laws can be shifted to the master franchisor.

• The franchised concept may not "translate" well in another country.
• The goodwill associated with the franchise in the U.S. may be non-existent in another country.
• Consumers may be biased against foreign brands for certain products and services.

• The franchisor’s net revenues from international franchising are often less than domestic net revenues due to increased expenses and sharing of revenues with the master franchisor.
• Revenues from international franchising will be affected by international tax treaties.
• Revenues will also be affected by fluctuations in currency exchange rates.

• International franchising may require more management resources than the franchisor can spare.
• Supporting and supplying franchisees is more difficult and expensive.
• In master franchising, the franchisor has even less control over operations by franchisees than under domestic franchising.
• Successful international franchising often depends on having good local business. partners. Bad master franchisors can be disastrous.
• Capitalism is a new concept in some countries.
• Local competition may be well-established.

• It will probably be more difficult to enforce a franchise agreement against a franchisee in a foreign country.
• Some countries have laws that are very protective of franchisees .
• The laws governing business relationships may be undeveloped in some countries.

• Political instability and governmental corruption are serious problems in some countries. Any international franchise agreement should take these possibilities into account, and you should do appropriate research before entering a new territory.
• Established franchise sales may be hard to follow in foreign languages. In addition, the political and cultural climate may not adapt to the franchised products.

• adapting foreign franchise systems to the U.S. market.
• preparing international master franchise agreements.
• adapting form franchise agreements (and other agreements) to be used with U.S. franchisees to comply with U.S laws and business customs.
• drafting franchise offering circulars and exhibits.
• preparing and filing the registration forms required by various state agencies.
• complying with other U.S federal and state laws and regulations affecting franchise sales or franchise relationships.
• establishing U.S. legal entities.
• acquiring U.S.-based franchise systems.

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