International Law

Contract negotiations are usually about the relative value of "things." Each party seeks the highest value for their "thing" while downplaying the value of the other's "thing." Negotiations around those "things" are particularly difficult in international franchise transactions where relationships can span generations, territories can include entire countries, and the franchisor's system is at the core of the franchisee's business. In other words, the franchisee will set out to build an empire on a foundation it only borrows from the franchisor. That fact critically shapes the parties' negotiations.

U.S. franchisor interest in Asia seems to be at an all-time high, yet from a legal compliance standpoint it has never been more difficult to enter into many of the various Asian markets.
From franchisor registrations to disclosure obligations to relationship restrictions, a significant number of Asian countries have overhauled existing franchise legislation or enacted new legislation that has put additional burdens on franchisors. This article provides a brief overview of some of the more onerous and/or unique franchise regulatory and compliance frameworks in Asia.

Franchisor experience requirements
Some Asian countries regulate who can franchise in their country. In China, regulations issued in 2005 required that franchisors must have operated two units in China for one year before franchising (the so-called 2/1 requirement)...

When the topic of international franchising comes up with clients, many are quick to dismiss the opportunities. Comments such as, "I haven't sold out the U.S. yet," are common. Some franchisors take a more inquisitive approach and ask, "What's it going to cost me?" Others want to know how quickly they can open because they want the initial fee or want to go there on vacation.

Whether the client's attitude is skeptical or overeager toward international franchising, I typically ask: "Is this a good market for your products or services?" Most answer: "I don't know."

Such lack of clarity can be a serious problem for franchisors embarking on an international franchising strategy-- and resulting mistakes can put ventures at risk...