Nowadays franchise enquiries from overseas are quite common because of the range of websites that are used by franchisors to advertise their franchise opportunity. So what do you do?

Expanding overseas can be exciting and very rewarding in equal measure and usually depends on how well established your UK franchise network is. However, no matter how long you have been operating your franchise, overseas enquiries can be a distraction and will certainly need more of your time to properly evaluate the opportunity.

A good starting point with the first overseas enquiries you receive is to think back to when you first contemplated franchising as an expansion route for your UK business. You would identify the start-up package items you needed to provide to train, launch and support new franchisees. Then you would identify the other costs associated with starting up a new franchise such as premises, vehicles, shop fitting, specialist equipment, etc. You will probably have prepared some operating forecasts to estimate a franchisees typical return on investment. With a master license there are usually 2 stages, first establish a viable operation in the given country and when that is achieved set about starting a franchising business to recruit, train and support a franchise network. How will you arrive at a valuation for the master franchise fee and what ongoing fees will you collect in return for support provided.

There is of course too much detail to go into now but the approach to overseas development should be methodical and thorough and your master franchisee recruitment process should mirror the UK approach. The key areas to look for are, where does the master franchise opportunity fit with the prospects long term plans, if the prospect is a corporate body does their culture fit yours and if an individual is there the right chemistry between you. Then as you would expect the financial terms are important because there are 2 stages to fund as mentioned above, first fund the pilot operation and when that is successful the franchising business has to be developed. Remember also when establishing a master franchise arrangement you are introducing a third party into the equation / relationship.

So can the key elements of the UK business model be replicated easily and can the product or service be sold for a profit that generates a good return for the franchisee and you (the franchisor). As mentioned above, but it's worth repeating, once it is established that the prospective master franchisee has the experience and funds required to set up a'pilot' operation then personality becomes very important together with trust and chemistry between the parties because teething problems are a certainty when adapting a UK business model to another countries culture and laws.

The last consideration is how the master franchise will be operated. Usually the master franchisor will offer sub franchises especially if the business model is service driven. If the business is product based then a distribution arrangement could work on a national or regional basis, depending on the size of the country.

However, the decision to expand overseas might be part of your long term business plan, in which case you could

⢠Set up and establish a company owned operation first

⢠Go straight to a Master Franchise model and help them get established.

⢠Sell individual franchise territories and manage the network from a UK base

⢠Set up a joint venture, see below

A Master Franchise

This is the most common overseas model and usually gives the Master Franchisor the exclusive right to sub franchise once they have established a successful operation that is used to recruit other new franchisees. There are 2 stages;

1 establishing a successful franchise model

2 establishing a franchising business to recruit and support a franchise network

A Regional Franchise

Is often used when a country is thought to be too large for one organisation to manage, such as the USA and where each State is treated like a small country. A Regional approach might also be suitable for a country with a vast population, for example India.

Area Development Franchise Arrangements

Can be used when sub-franchising is not considered necessary or appropriate. In this situation the franchisee must own and develop all of the new franchise operations throughout the country or region. For example some of the international retail clothing brands operate area development arrangements.

Direct Franchising

Is used when the Franchisor prefers to take direct control and manage their overseas expansion but later when the franchise model is proven and successful the Franchisor has options, such as entering into some form of joint venture arrangement.