Overseas Franchising and Licensing
06 December 2012
The last part of this series focuses on international franchising and licensing business. The extreme popularity of this system has attracted the attention of the most powerful brands across the globe. There has never been a dull moment in the industry since its initial days in the mid 1950s.
International franchising and licensing have proven an immensely efficient and profitable way of expanding one’s business overseas. US-based franchises are increasingly penetrating fertile markets overseas and vice-versa. Domestic franchisors who are willing to take their franchise overseas already enjoy a receptive feedback to their business, all thanks to their global marketing and strategy planning.
A genuine fascination and desire among consumers for well-known foreign brands and products paves the way for a congenial entry into unexplored territories.
The more generalized reasons for this increased networking and expanding business remains more or less the same: higher demands for quality goods and services, increased disposable income and a desire to have the best the money can buy.
These reasons for the expansion of franchising and licensing remain uniform throughout the world. Foreign franchisees have welcomed with open arms the greater levels of profits and lower level of risks involved in the marketing of an established franchised system.
No doubt that its a very profitable and “in” thing to venture into overseas franchising and licensing alliances; however, these business opportunities also bring with them challenges for which proper planning and timely execution of these strategies is necessary.
The first and foremost thing to consider while licensing or franchising overseas is the territory in which you wish to expand your business.
Not all geographical areas would prove conducive to your franchise or license system. The country or area should be well-chosen, keeping in mind the possible plans for expansion in future, easy availability of raw material and skilled labour, a limited language barrier, cultural differences, consumer behaviour patterns and marketing issues, to name a few.
More important in this context is ascertaining the general social health, political stability, religious restrictions and the likes of the target country.
Legal issues are certain to become roadblocks if not taken care of at the appropriate time before the setting up the franchise. Local legislation, for example, should be checked for being amenable to facilitate the establishment of a franchise, as should local tax laws, import-export and foreign investment policies, agency liability and labour laws.
These issues should be aptly dealt with before they create obstacles to the smooth functioning of the entire business.
It is also very important for a franchisor to have a strong background in terms of finance, support staff, resources and training programs so that the franchisor is well-equipped to help and support the franchisee abroad.
Knowing the proposed market, the potential partners in the overseas market, the available resources, the franchisor’s own products and services and their quality, along with having a local liaison, is equally important. Most importantly, the franchisor needs to have a thorough knowledge of the targeted market. It is prudent to conduct market surveys and research in order to gauge the demands in the market, ongoing trends and the kind of competition that prevails.
Another important aspect is the trademarks and designs associated with the trade. It is necessary to properly register trademarks, logos, designs and slogans in the particular areas where the business is to be extended. Domestic registration does not automatically provide trademark rights in other countries; therefore, checking the availability of use and adoption of a particular mark is very important.
Further, the kind of products or services that you have provided in the domestic market may call for variations in terms of taste, size, price or quality. Being sensitive to these issues will ensure that you come up with the best-suited products or services for the international market.
Knowing your market and your rights as a franchisor or a trademark owner lays down the foundation for the creation of a successful franchise. Success follows on having the right franchise in the right market.
Lall Lahiri & Salhotra
LLS House, Plot No. B-28,
Sector - 32, Institutional Area,
Gurgaon - 122001, National Capital Region, India
T: +91 124 2382202, 2382203
F: +91 124 4036823, 2384898
E: Rahul@lls.in
W: www.lls.in
