Author: Paul Segreto

Passionate About Fueling Entrepreneurial Spirit; Entrepreneurship Coaching; Management & Development Advisory & Consulting; Franchises, Restaurants, Service Businesses; Thought Leader, Influencer, Content Creator & Author.

Be Aware Of The Downside

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optimismThe following was my response to a recent post on Franchise Pick. The post was about franchisor, Curves International, and its actions when one of its franchisees fails and shuts down its location.

Joel Libava, The Franchise King, posted a question today on Twitter about whether or not a business plan is important when considering a franchise opportunity. My response was a firm yes, but the plan must include an exit strategy. That exit strategy must include a plan for predetermined events like retirement, as well as unforeseen events usually as a result of poor sales, employee theft, mismanagement, etc.

Unfortunately, it’s human nature only to look at the positives of a relationship, personal or business. How many couples avoid the issue of prenuptial agreements because they don’t want to start off on the wrong foot? Maybe they feel it will jinx their relationship or provide an out to the party not willing to work at the relationship? The same is certainly true in the franchise arena. However, in both cases, it is prudent to look at the potential downside and have all the issues outlined ahead of time. If nothing else, at least it keeps everyone focused on the potential consequences of failure. Something that may provide them even more incentive to succeed. I mean it is easier to fail, than it is to succeed!

In the case of franchisee failure, there’s no way it can possibly be a surprise to anyone. Trends become evident and it would take a tremendous amount of shear stupidity and ignorance for anyone to believe a franchise location closing is a surprise. I guess we could chalk it up to the “head in the sand” scenario?

My recommendation to franchisees and franchisors alike is to have a business plan in place at the beginning, complete with an exit strategy. Understand your mutual obligations upon termination. Communicate, communicate and communicate all the way from franchise disclosure to franchise closure. Notice the only thing missing is “dis.” To use the street slang of “dis”, make sure you don’t dis communications, don’t dis obligations, and don’t dis responsibility. For anyone that doesn’t know what dis means, it’s most easily defined as “ignoring and/or disrespecting.”

My advice to franchisees, don’t get all starry-eyed at your partner like you’re in love. Realize it’s a business relationship and make sure all parties to the agreement, including yourself, live up to their obligations. Further, when trouble is on the horizon, do not, I repeat, do not put your head in the sand. Keep in mind that when your head is in the sand, your most vulnerable ass-et, is exposed to the entire world to take advantage of.

To the Curves franchisor I say “Shame on you as you tarnish the good name of franchising and all the franchise bretheren because of your greed, unprofessionalism and lack of common, decent care for individuals. The very individuals that trusted you to take them to the altar.”

Franchisors Financially Assisting Franchisees: Good Or Bad Idea?

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The following article was posted at LSJ.com and discusses franchisors assisting franchisees froma financial standpoint in order for the franchisees to withstand the current economic crisis. But, is it a good or bad idea? Does it set precedence that will become expected at the first sign of economic trouble in the future? Will franchisors’ efforts and goodwill be used to hold them hostage in the future? Read the article and then decide for yourself. We look forward to your thoughts.financial-assistance

Some franchisers taking drastic steps to weather today’s tough economy
Staff and Wire Reports • April 6, 2009 • From Lansing State Journal

Co-signing loan papers, buying out operating contracts and modifying licensing fees are among the aggressive steps some franchisers are taking to help their franchisees weather the chilly economy.

Just like small, independent business owners, many franchisees have struggled amid a lingering credit crunch and weak consumer spending.

Their survival is important. Nationally, franchises accounted for 11 million jobs, or 8.1 percent of the private workforce, and produced $880.9 billion in goods and services in 2005, according to the most recent data available from the Washington-based International Franchise Association.

Franchisers, who license the right to operate businesses in their names, have a vested interest in continuing to attract new franchise buyers and to help their current store operators survive. Fewer franchises mean less licensing – and royalty-fee revenue, on which franchisers depend to survive.

A rash of store closures also can mar a franchise’s brand.

“I think we’re going to see a fallout in our industry just like we’re going to see a fallout in other industries,” said Jeff Johnson, founder and CEO of the Franchise Research Institute. The institute, based in Lincoln, Neb., performs surveys for franchisers that gauge their franchisees’ satisfaction.

The strategies franchisers are employing now are not unheard of even when the economy is good, Johnson said. But some of the more aggressive steps, such as buying back stores from franchisees who want out of their contracts and temporarily foregoing certain fees, are rare.

Restaurant and other food service franchisees have been among the hardest hit by the economic downturn. Health care and certain technology-related franchises still are seeing strong demand, though.

Local and national franchisers say they’re still seeing demand from prospective buyers who want to open new franchises. The biggest problem is securing credit.

“It’s like a pendulum has swung,” said Bob Fish, CEO of East Lansing-based Biggby Coffee, which has 109 franchise-owned coffee shops.

A year ago, Fish said, new franchisees easily could get loans to cover the roughly $300,000 cost to open a Biggby store – even with a company stipulation that franchisees have enough cash to cover about one-third of the cost.

Now, he said, franchisees are lucky to get loans for half the cost. “It has slowed things down, absolutely,” he said.

Fish said his advice to franchisees stays the same: Shop around for a lender.

But some franchisers have stepped in to help applicants obtain financing by being a co-guarantor for loans and lines of credit.

“We have literally done a handful of those, but it is not a big number at all,” said Lee Knowlton, chief operating officer for Scotts-dale, Ariz.-based franchising company Kahala Corp. Kahala’s chains include Cold Stone Creamery, Blimpie, Samurai Sam’s Teriyaki Grill, TacoTime and other fast-food restaurants.

One of the biggest challenges for Kahala and other restaurant franchises has been real estate.

In some instances, franchisees who moved into shopping malls and neighborhood strip centers are struggling because major tenants around them closed.

But the economy has created opportunities, too. With the real estate market in decline, there are deals to be had for commercial space to open new stores, said Brent Taylor, president and CEO of East Lansing-based TT&B Inc., which franchises toy stores.

Taylor owns TreeHouse Toys & Books in Lansing Township’s Eastwood Towne Center and franchises under the Brilliant Sky Toys & Books name.

“We’ve been able to negotiate some real estate deals with landlords that are just unprecedented with what we’ve seen,” he said.

Some franchisers have started buying back distressed stores from their franchisees or letting them be shut down.

Tropical Smoothie Cafe, a Destin, Fla.-based franchise that sells sandwiches, wraps, salads and fruit drinks, reopened two Phoenix-area franchises in the last year. “It’s the very first time that we’ve done anything like that,” said Scott Palmateer, a regional franchise consultant for Tropical Smoothie Cafe.

Delhi Township-based Two Men and a Truck International Inc. CEO Brig Sorber said failing franchises can damage the reputation of the whole system.

So, even as growth has slowed at the moving company – which added only six franchises last year – Sorber is focusing attention on improving existing operations.

The privately owned company, with about 200 locations, has been hurt by the national decline in the housing market – which means fewer people are moving.

Two Men is working on ways to help its franchisees cut costs and to get into new markets, such as moving for businesses and interstate moving, Sorber said. “There’s less moving going on, but there also are less people doing the moving,” he said.

Lansing State Journal business reporter Jeremy W. Steele and Andrew Johnson of the Arizona Republic contributed to this story.

Content Marketing: It’s All About Distribution

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The following article has been submitted by Guest Author, Melih (“may-lee”) Oztalay. Melih is CEO of SmartFinds Internet Marketing, an internet marketing company known for developing very creative marketing strategies. Before starting SmartFinds, Melih ran one of the Detroit Metropolitan area’s premiere Internet Service Providers (ISP), SpeedLink, from the early 1990’s where he served for nearly a decade as President and CEO. In the new century he has pursued taking the creative and marketing services from his experience in the 1990’s to businesses via SmartFinds Internet Marketing. franchisEssentials is honored to have Melih as one of its Guest Authors.

Content Marketing: It’s All About Distribution
as submitted by Melih Oztalay

You may have heard that “Content Is King” on the Internet. The statement is 100% accurate. The one with the most content and backlinks to their website wins. (The “and backlinks” statement is significant.)

Of course, developing and writing content is only the first step. Where and how to distribute your content is even more important! Consider this: If you post 1,000 content items on the Internet, but they are posted in a way that lacks viral capabilities, the reach will not expand and will be constrained within the 1,000 original websites. As a result, these content items do not provide much value. If, on the other hand, those same 1,000 posted content items virally find their way onto 100,000 websites, your business achieves a much bigger impact from the outreach effort.internet-marketing

Let’s dig into this process of content marketing. First, let’s define content marketing:

“The convergence of editorial and advertising using multiple formats that allows for viral distribution to raise awareness about your business and website.”

Content Marketing is not directly about your website, but rather what is happening overall within your business and industry sector. This is a communications art and outreach effort that does not involve direct selling, but is rewarded with sales and loyalty. Content Marketing is a supportive method of selling via quality, relevant and valuable information which:

Educates your customers
Shows your authority in your field
Allows prospects to find you through multiple sources
There are a variety of types of content, including:

Articles (informative and educational, not featuring your business)
News releases
Photos
Social Media
Videos
The above tends to have the most viral impact, however, additional types of content are as follows:

E-Newsletters
Powerpoint Slides & Presentations
Podcasts
Webcasts or Webinars
…So you get the idea that there are many other items which might be included as types of content

Unfortunately, the process of physically distributing content on the Internet is far from an automated task. Instead, the process is laborious. Many of our clients simply do not have the time and resources for this important outreach effort; therefore, they outsource the management of their content marketing efforts to SmartFinds Internet Marketing. For companies who directly engage in content distribution, it is typically something to pursue at regular intervals over weeks and months. Locating websites that accept your content, specific to your business and industry is not as important as casting a wide net on the Internet. Some distribution point categories to consider include:

Article Networks
Blogs
Directories
Forums
News Networks
Wiki Communities
Photo Communities
Video Communities
…and many more

You will notice that many of the above are plural. Content marketing allows you to support your identity on the Internet and as such, acts as a public relations tool through a variety of distribution areas.

Stay tuned to this SmartFinds Digest; and we will tackle strategy, content development, benefits, measurement and search engine ranking effects of content marketing!

For now here is an exercise you can perform yourself. Do you know how much information exists on the Internet about your business? Have you performed a search at the major search engines on your company name? What about a search on your domain name? Now compare that to your competitors. Tell us what you found!

Are Relationships With Your Franchisees Strengthening Your Franchise?

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The following is an article submitted by Guest Author, Katryn Harris. Katryn is the CEO of Open Box, a company focused on helping franchisors use technology to build their franchises. She brings her background in management, business strategy and communication as well as her team of technical experts to work with franchisors, ensuring that their technology fits their business strategy and moves their franchises forward. Be sure to check out Katryn’s blog at www.growfromhere.com.

Are Relationships With Your Franchisees Strengthening Your Franchise?
as submitted by Katryn Harris

business-relationshipsAs a franchisor, you are in the business of building relationships; relationships with your franchisees, with your potential franchisees and with your end customers. Relationships build sales, build your brand and build your franchise.

The franchisor /franchisee relationship has interesting challenges that may not be seen elsewhere in the business relationship world. It’s not employer/employee, it’s not quite a partnership, and there are elements of both financial dependence, and inter-relatedness. The franchisor & franchisee depend on one another, and are both accountable to one another, and the success of each depends strongly on the success of the other.

One of the key success factors for good relationships (with both potential & existing franchisees) is to set your boundaries and expectations clearly. Some franchisors are more or less consultative, some are more or less friendly with their franchisees, some are more or less clear from the outset on expectations and accountability (and whole books have been written on which of these is right and which is wrong). I highly recommend
a) Knowing the pros and cons of leaning towards either side of the spectrum (do your homework)
b) Being clear about where you sit along the spectrum, and
c) Communicating where you sit to your franchisees and, particularly to potential franchisees.

Whether you are more or less consultative in your relationships is actually less important than knowing why you have chosen that position, being clear about where you stand, and then finding franchisees who are looking for that particular degree of consultative relationship. If you can attain these three, the franchisor/franchisee relationship will be strong and rewarding for both of you & lead to strong franchise growth.

One great resource for building your franchise through strong relationships is Greg Nathan and his books about the franchisor/franchise relationship, such as The Franchise E-Factor.

More Regulatory Structure for Franchising?

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enforcement2Real estate, insurance and financial services industries all fall into the category of highly regulated and policed industries.

Licensing, including testing, are required for all sales personnel. Continuing education is also mandatory. Each industry has some type of regulatory agency with enforcement powers whose primary focus is to maintain the integrity of the respective industry. Each industry maintains some type of bonding or minimal cash position requirements to ensure economic stability.

If franchising adopted a similar structure, or a portion thereof, what would be the pros and cons? What would the effects be over the next twenty years?

Recent discussions in various franchise groups eluded to the fact that there are too many franchisors within franchising today. There’s been talk of less than ethcial practices by various franchisors and very poor business practices by others. Would tighter controls and stricter requirements strengthen or actually weaken the franchise industry?

Mind you, before chastising me about all of the above, believing it is my intent to propose more regulation and the requirements that come along with regulation, please understand it is not my position that any of the above be entertained. Instead, I believe issues need to be discussed, problems need to be identified, and solutions need to be implemented to fortify ALL franchising sooner by the ENTIRE industry itself, rather than later when it’s out of our hands.

Franchise Growth: Are Concessions and Discounts Necessary?

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This article is based upon a recent discussion in a LinkedIn franchise group. The original discussion posted the question, “What kind of discounts or concessions are required now to get a franchisee candidate to move forward?” and generated many responses and different views. The following is my response when my view about getting back to basics was preceived to be fine during “normal” times as opposed to during more difficult times, such as the present. A subsequent response from another franchise professional implied there are too many franchisors. I’ve addressed that as well.

discountAlthough it’s certainly easier to accomplish franchise growth during “normal” times, the basics need to be in place even more so during tough times. That’s not to say we don’t need to think and act outside-the-box to make something happen. It just means we need to be extra prudent and diligent in our actions and not use the economy as an excuse for poor execution of skills.

If we are to offer discounts and concessions in awarding franchises we need to be extremely careful we don’t oversell or create the perception of desperation. By doing so, we’ll either lose the deal or create a situation whereby the franchisee will not have respect for the franchise system and feel if one or two concessions were made initially, why not more moving forward? And then, there’s the perspective of franchisees already in the system that paid full amounts without concessions. What’s in it for them?

Nevertheless, with reports like Franchise Update’s about poor franchise sales performance and practices, I can’t help believe franchise systems wouldn’t be in better shape if their sales basics were perfected. It has to start with the basics before changing direction or considering revisions to the program.

In any business, just like in any sport, when a slump is emminent, it’s the fundamentals that need to be worked on before anything else should be considered or entertained. Once that’s done, then it makes good business sense to consider other options. At the very least, it should be done simultaneously. If not, what’s going to be the excuse when concessions and discounts don’t work?

PS – Saying there are too many franchisors is akin to saying there are too many businesses of the same kind. What happened to free enterprise and entrepreneurship? Maybe, franchising could be better served by more regulation, licensing and policing, to weed out the weaker (for whatever reason) franchisors and make it more difficult to become a franchisor. Unfortunately, I don’t see that happening because the “big boys” of franchising will squash those efforts in a New York minute. I look forward to debating this topic in a different discussion or forum.

Has LinkedIn Lost its Appeal?

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Is it just me that feels individuals are using LinkedIn more and more just to post job requests and sell services than to engage in discussions, meet new people, and develop relationships.

Have we become bored with LinkedIn?linkedin-logo2
Is LinkedIn a waste of time?
Why have we joined LinkedIn in the first place?
Are we achieving our objectives with LinkedIn?
Do we really need LinkedIn?

Personally, I find LinkedIn most helpful because it provides benefits and information that would be impossible to bring together under any circumstances except in a similar networking site. So why not use LinkedIn for all it has to offer?

Do you realize the wealth of experience at our fingertips on LinkedIn? Without LinkedIn we might never get to network with some of the world’s most intelligent people. Not just know them, but be able to tap their brains for information and share thoughts and feelings about any subject imaginable. I’m not just talking about the obvious contacts like leaders in our respective industries, or even famous people that we come across now and again.

Instead, I’m talking about the great minds of tomorrow, the leaders of tomorrow. Imagine having had the chance, 10, 20, or 30 years ago, at sharing information and discussions with Bill Gates. Or, being able to read Steve Jobs’ answer to a compelling question. Or, how about learning what’s on the mind of a young Donald Trump or Richard Branson. Or, from the franchising perspective, how about experiencing the passion and vision of aspiring entrepreneurs Bud Hadfield and Ray Kroc.

Imagine having been able to communicate one-on-one with one of today’s government leaders and being exposed to their thoughts and views at an early age. What was President Obama like thirty years ago?

The point is, if we take full advantage of LinkedIn now, today, we might be exposed to the leaders of tomorrow. Through discussions and sharing information we might learn today, what can benefit us tomorrow. We might receive some insight today that becomes essential tomorrow.

We just don’t know what might help us in the future. So, why not take full advantage at what we have right in front of us today? Here’s to engaging discussions, new and renewed relationships, and sharing of information!

What Social Media Marketers Can Learn from Email Marketing and In-person Networking

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The following article was written by Guest Author, Linda Daichendt. Linda is Founder, CEO and Managing Consultant at Strategic Growth Concepts, a consulting firm specializing in start-up, small and mid-sized businesses. She is a recognized expert with 20+ years experience in providing Marketing, Operations, HR, and Strategic planning services to start-up, small and mid-sized businesses. Linda can be contacted at linda@strategicgrowthconcepts.com and the company website at www.strategicgrowthconcepts.com.

What Social Media Marketers Can Learn from Email Marketing and In-person Networkingnetworking-photo
as submitted by Linda Daichendt

Are you still trying to figure out the “do’s” and “don’ts” of social media marketing? Be assured, you’re not alone. As the social networking community continues to grow at an ever-increasing pace, marketers and small business owners are challenged with learning how to apply standard marketing principles to this new medium.

One of the challenges of social media is that it doesn’t respond well to “advertising”. Social media marketing needs to be more subtle. It’s about networking to build a reputation as an expert, and then having your expertise sought out. To give you a relevant example, many of you attend networking meetings for your Chamber of Commerce or various trade associations. When you attend those functions do you walk in wearing a sign that says “buy from me”? Or, do you take a more subtle approach by trying to meet new people, learn about what they do, offer a free bit of advice here and there, and build relationships that down the road will result in new business? If you’re like most people, you follow the second option and with that being the case, why would you not apply that same strategy to social networking? You would – and you should!

Additionally, since email marketers have already traversed a path similar to that now being explored by social media marketers, there are a great many lessons that can be learned by reviewing email marketing strategies and the results which were achieved. A recent article by Stephanie Miller, published in MediaPost online publications, explores the email media / social media comparison and provides some interesting lessons to help you improve the results from your social media marketing strategies. This article can be found on our website.

Will the Economic Stimulus Bill Create New Franchise Opportunities?

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The following article was written by Guest Author, Ray Haliber. By accessing his franchise website at www.azfranchises.com, you’ll find Ray offers a resource for entrepreneurs to find and research franchise opportunities for sale from A to Z. Ray has ten years’ experience as a small business broker in Arizona. His small business site may be previewed at www.azbop.comfinancialaid-photo.

Will the Economic Stimulus Bill Create New Franchise Opportunities?
as submitted by Ray Haliber

With the recent passing of the huge economic stimulus package there has been some speculation about whether some of its provisions will create or spur the development of new franchise business opportunities in certain industries like health care or renewable energy. The obvious question is whether major government incentives and investments in these 2 highlighted industry sectors will create sustainable franchise business models after the initial boost from the stimulus spending bill plays out.

In my opinion the answer is that this is a very realistic development given the scope of the stimulus bill and some of stated new policies of the current administration regarding health care and energy. In fact, potential small business opportunities emerging from the stimulus bill are becoming more obvious, (particularly in renewable energy) and appear to have a very good chance to create some viable franchising opportunities for entrepreneurs.

Heath Care: According to what I have read, the economic stimulus package includes nearly $20 billion dollars to help digitize or computerize health and medical records in the United States. I would think this could present some serious potential opportunities for small business owners and entrepreneurs because obviously private companies will become involved in providing services for this enormous and long term project.

Even with the recent news that Sam’s Club and Dell intend to enter this market by selling software to digitize medical records doesn’t mean there will not be plenty of other niche opportunities and markets available to develop and service. According to recent stats only about 17% of doctors offices are currently digitizing medical records. And with nearly 800,000 active physicians in the United States, many with small to medium size practices, their will undoubtedly be opportunities for smaller players to develop business franchising models that can service business opportunities that emerge from this program.

Renewable Energy: From what I have read and heard nearly $60 billion of the $790 billion stimulus bill will be spent on alternative and clean energy projects and other environmental related projects and research. This includes billions of dollars for greening government buildings, weatherizing homes and businesses, and providing significant tax credits and grants to help fund and subsidize renewable energy applications across the board.

Surely this type of massive government investment will almost certainly spawn a number of new franchising concepts to service the emerging business and consumer needs that will be created by this commitment. This would conceivably include the development of solar power related service franchises that would provide installation of photovoltaic panels for residential and commercial applications. Or green consulting franchises that would provide expertise to commercial businesses on how to “go green” or conserve energy. Or maybe new home improvement related franchise businesses will emerge that specializes in weatherization and residential energy efficiency.

In summary it’s going to be an interesting time to see how the franchising industry will adapt and ultimately capitalize on the potential business opportunities and new markets that will be created and supported by the stimulus bill spending. My guess is that it should ultimately produce some viable and profitable franchise companies that may someday become familiar household names and brands.

Introduction to International Franchising

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world-map-photo1The following article was submitted by Guest Author, Kathryn Rookes. Kathryn is an experienced franchise attorney and a member of FSB Legal, a virtual law firm. She is one of the very few franchise attorneys in the United States with experience in a government regulatory practice (Maryland Division of Securities), private practice, and as in-house counsel. With this diversity of experience, Kathryn understands the issues that franchisors face on a daily basis.

Introduction to International Franchising
as submitted by Kathryn Rookes, Attorney, FSB Legal

Introduction

Many franchisors perceive international expansion of their franchise concepts to be a great way to generate cash on a short term basis and do not fully appreciate the long‐term commitment that successful international franchising requires. The level of commitment and resources required to expand internationally is often greater than that required for domestic expansion. This article provides a brief overview of the requirements for international franchising and identifies a typical international deal flow process. We also have included several resources that contain additional information for further research.

Evaluate Your Resources

When making the decision to go international, you must consider the additional resources that you will need to successfully expand and support your new international franchisees. Areas of increased costs to consider include telephone and postage, travel, marketing, trademark registration, preparing international franchise agreements and disclosures, costs of goods due to export/import controls, foreign taxes, translations and document registration, to name a few.

Determine What You Will Offer

International deals are normally structured in one of three ways. First are single unit franchise sales (sometimes called direct franchising), much like many systems sell in the United States. The next option is area development rights, in which you identify 1 developer who opens multiple units of its own. The third common option is master franchising (also called sub‐franchising). In this method you identify 1 developer that has the right to open its own units, and also the right to sell additional units to other franchisees. In addition to these three methods, some international arrangements are structured as joint ventures, in which you are an equity partner with your foreign franchisee. Each method has its own risks and rewards, so you must evaluate your goals and your resources to determine which method best suits your needs.

Finding Good Research

Your research on each opportunity generally consists of two areas, research on the territory and research on your prospective franchisees. The internet provides a wealth of information on the territory. The United States Department of Commerce is a good starting point as is its included agency, the International Trade Administration. The trade promotion unit of the International Trade Association, the United States Commercial Service also provides significant help by providing market research, worldwide trade events for promoting your offering, assistance in identifying prospective franchisees, manufacturers and distributors, and individualized counseling on going international.

For research on your prospective franchisees, you are well served to retain the services of one of the many companies that provide due diligence or investigative type services. Research on people and companies in other countries is a very tricky business, as the stability, accuracy and adequacy of information in other areas of the world is often lacking. These companies will be able to evaluate the trustworthiness of the information they obtain, and can educate you on the limitations of the information so that you can make your own decisions on the risks you are assuming by choosing any particular franchisee.

Establishing a Deal Flow Process

The deal flow process for international deals will usually be significantly different from your domestic deal flow process and will necessarily require more time and resources for each deal. We generally recommend the following steps to ensure compliance with Unites States’ and the foreign country’s local law.

1. Determine whether there are any legal or practical barriers for your target country. Legal barriers include the U.S. government’s trade embargos and terrorism sanctions, in which U.S. businesses are prohibited from conducting business in certain countries. You may find this information primarily at the United States Department of the Treasury, Office of Foreign Asset Control website. The primary restrictions involve, as of January 2009, Balkans, Belarus, Burma, Cote d’Ivoire (Ivory Coast), Cuba, Democratic Republic of the Congo, Iran, Iraq, former Liberian Regime of Charles Taylor, North Korea, Sudan, Syria and Zimbabwe. Practical barriers (which also can be legal in nature) might include currency export restrictions (you won’t be able to get paid), prohibitions on foreign investment and/or ownership (you’re not allowed to invest there), lack of governmental infrastructure (you can’t register your trademarks or protect your intellectual property, trade secrets or contract interests due to lack of a stable court system), competition (both laws and actual), taxes (you can’t afford), restrictions on transfer (can’t stop your franchisee from selling out), economic conditions (won’t support your business model) and other such items.
2. Once you have determined that there is no barrier, you should determine whether there is a franchise disclosure and/or registration law in the target country. If there is, you should retain local counsel immediately to draft the necessary disclosure and handle the registration for you. We are happy to assist you with this process.
3. Identify your prospective franchisee and begin your background check on the prospect.
4. Negotiate and document a Letter of Intent that contains the material terms of the new deal. You will normally require a deposit against the initial development fee on the signing of the LOI.
5. Retain local counsel to review your proposed form of agreement to revise the agreement to ensure that it complies with all applicable local laws.
6. Negotiate with your prospective franchisee on any changes to your form of agreement. Once all terms are negotiated, you will finalize the agreement and proceed with signing.
7. Once your agreement is fully signed, you will want to proceed with registering your trademarks in the country, if you don’t already have the marks registered. If you have a large budget for your international expansion, you should ideally move this step up as early as you can afford, even up to step 2 if possible.
8. Once all of the above is accomplished, the real work begins. You now need to arrange for training, import of products or ingredients, site selection assistance, site development assistance, marketing assistance, and all of the other support services that franchisors normally provide.

Summary

With proper planning, international expansion of your franchise system can be an exciting new challenge that brings you many rewards. At FSB Legal, our attorneys are experienced in international franchising and have completed deals in over 35 countries. We are happy to help you begin this journey.