After the franchise development department and legal department finalize a new country license agreement and the initial fees are paid, the real work begins for both the franchisor and the new country area licensee or master franchisee.
Various studies indicate that 40 percent or more of all international license agreements do not result in the mutually agreed number of units being opened over time and that often the units that do get opened in a country underperform. The results are less royalties for the franchisor and sometimes even termination with associated legal costs for the franchisor and damage to the brand.
How do you ensure that you as the franchisor are doing everything possible to make the licensee successful so that your franchise can realize the full financial potencial of a country? And how does a franchisor manage international licensee support in a cost-effective manner? The following are best practices that we have learned over the years as franchisor executives and taking more than 30 U.S. franchise brands international. We also know from experience being international licensees of a U.S. brand that it is difficult to startup and grow a foreign franchise in another country with the quality and standards required by the franchisor.
While food/beverage, retail and service franchises have some differences when it comes to international support, these business and franchise types have similar and different processes moving operations forward.
COMMUNICATION, RELATIONSHIPS AND FOLLOW-UP
We have found that the No. 1 item for successful international development is consistent and detailed communication with your intentional licensees. Lack of communication and consistent follow-up are the most common reasons international licensees fail. As a start, when the licensee sends their team to your headquarters for initial training, spend time with them. Make them feel like family. This is extremely important for the relationship in years to come. If the relationships are good early on, it will be much easier to handle problems that come up. And they will.
TIMELINE AND CHECKLIST
A franchisor should use their home country new franchisee startup timeline and checklist for the new country licensee startup. Whether they are an area licensee who will build, own and operate all units in their country or a master franchisee who will own and operate some units and then start sub-franchising, they all start out as a single unit franchisee.