There are a number of points to bear in mind when a network plans to expand abroad:
– some countries have a system equivalent to our own Frech “Loi Doubin”, requiring a “Franchise Disclosure Document” (i.e. DIP) to be submitted to the prospective franchisee several months in advance; other countries go further, requiring the franchisor to register with the local authorities before seeking out franchisees;
– the trademark must be protected in the country concerned: this may take several months, or even years, depending on the country;
– it must be ensured that the products used in the franchise can be imported / manufactured locally;
– in some cases, the financial terms of the franchise or master-franchise agreement will not be freely determined by the parties: local authorities can sometimes control the level and stipulate, for example, that the royalty rate must not exceed X%;
– tax authorities are everywhere: the country of destination may impose a withholding tax on the royalties paid by the foreign franchisee, which may have an impact on the franchisor’s margin;
– the language of the contract is not necessarily free: imperative local rules may require translation of the contract into the local language, or even of the DIP.
There are a number of points to bear in mind when a network plans to expand abroad:
– some countries have a system equivalent to our own “Loi Doubin”, requiring a “Franchise Disclosure Document” (i.e. DIP) to be submitted to the prospective franchisee several months in advance; other countries go further, requiring the franchisor to register with the local authorities before seeking out franchisees;
– the trademark must be protected in the country concerned: this may take several months, or even years, depending on the country;
– it must be ensured that the products used in the franchise can be imported / manufactured locally;
– in some cases, the financial terms of the franchise or master-franchise agreement will not be freely determined by the parties: local authorities can sometimes control the level and stipulate, for example, that the royalty rate must not exceed X%;
– tax authorities are everywhere: the country of destination may impose a withholding tax on the royalties paid by the foreign franchisee, which may have an impact on the franchisor’s margin;
– the language of the contract is not necessarily free: imperative local rules may require translation of the contract into the local language, or even of the DIP.
In short, it’s a good idea to anticipate these issues, and we’d be delighted to discuss them with you!
