Entering a Foreign Market – Resources To Help You Succeed

Just as it is in the U.S., every franchisor wants to find and attract the best-suited franchisees for their franchise system — efficiently and effectively.

The first prospect isn’t always the best choice, so be sure to consult with your attorney or consultant on how to conduct a reasonable background investigation on the prospective franchisee. Your professional advisors can advise on identifying standard data you would want to know about any prospective franchisee, such as business experience, education, sources of funds for capital, litigation history, bankruptcy, banking, and business references. The type of information and data available may be lacking in some countries; in others, the information is available but not in a single place.

You will need to determine the best method to obtain information, including having your prospect execute a franchise application permitting you or an investigatory firm on your behalf to obtain that information from third-party sources such as government offices, banks, and other information-gathering firms. Fees for investigatory firm reports should be incorporated into the initial fees you obtain under any preliminary agreement that you enter into with a prospective franchisee for a franchise in a foreign market. Depending on the country you are targeting, you can obtain some information from the U.S. consulate or embassy.

Check out the International Trade Administration’s (ITA) Industry & Analysis (I&A) unit. The role of the I&A unit is to synthesize the ITA’s industry, trade, and economic expertise to advance the competitiveness of U.S. industries through developing and executing international trade and investment policies and promotion strategies.

Don’t be surprised if you have a lot of U.S. as well as foreign-based competition for the best franchisees. Foreign franchisors are franchising with increasing frequency — in their home countries and abroad.

To begin your search for prospective international franchisees, try the following sources:

• Trade missions: The International Franchise Association (IFA) organizes trade missions. These missions last 5 to 10 days and span two to four countries. They include meetings at U.S. embassies and one-on-one appointments with potential investors, prescreened to meet your requirements for a franchisee.
• Trade shows: The annual International Franchise Expositions (IFE). held across the U.S.. typically draw thousands of foreign visitors in search of franchise opportunities. Contact the exposition’s producer, MFV Expositions. MFV also sponsors franchising events in other countries, where U.S. franchisors can learn from local professionals on topics like how to enter the country, and foreign franchisors are able to learn from U.S. franchising professionals. {Editor’s note: In 2018, MFV teamed up with Franchise Update Media to co-sponsor the European Master & Multi-Franchising Conference; the next one is January 28–29, 2020 in Vienna.}
• Embassies: Government offices in foreign countries can help you network and qualify prospective candidates. You can also try U.S. chambers of commerce and industry associations. The U.S. Department of Commerce’s International Trade Administration collaborates with 19 U.S. government agencies to run export.gov to assist U.S. businesses entering into foreign markets.
• Referrals: Contact franchise consultants and attorneys with affiliate offices in foreign countries. Franchisors of non-competing concepts may also be willing to share leads. Give them a call.
• World Franchise Council: The World Franchise Council (WFC) is made up of approximately 30 national franchise associations in many countries. The council’s purpose is to encourage international understanding and cooperation in the protection and promotion of franchising worldwide. Many of the WFC’s franchise association members or the members of those associations host local franchise trade shows during the year. When exploring how to enter a foreign market, these local associations can provide you with information on the market and let you know the dates of any upcoming trade shows.

This is an excerpt from the book Franchise Management for Dummies by Michael Seid and Joyce Mazero.

 Joyce Mazero, a shareholder with Polsinelli PC, a law firm with more than 850 attorneys in 22 offices, is co-chair of its Global Franchise and Supply Network practice. Contact her at 214-661-5521 or jmazero@polsinelli.com. Michael Seid is managing director at MSA Worldwide. Contact him at 860-523-4257 or mseid@msaworldwide.com.