As you build your business and expand your empire through franchising, it is not only critical, but potentially dangerous to sell Internationally without confirming you have abided by and registered your franchise offering with the necessary international regulatory agencies and governing bodies. If you are based in the United States, you have the comfort in knowing that if you are offering a franchise in the U.S., you are already following the most strict and comprehensive franchise regulations in the world. The Federal Trade Commission and the most developed franchise marketplace in the world have supported this evolution of what is now a complex legal environment for franchising in the United States. Canada has similar regulations to the United States through the Arthur Wishart Act which requires disclosure of key items and the presentation of this information in a specified format to the buyer before a purchase can be made. France, Great Britain, Australia and other nations have followed U.S. franchise regulations to have their own set of standards and rules which a franchisor must follow in order to be allowed to offer a franchise within their borders. It is recommended that you have local counsel in any foreign country you are selling franchises into so that you may avoid obvious mistakes and potentially put your franchise in harm’s way.
On top of regulation and international franchise laws, there are other specific laws which may impact your ability to offer a franchise in a given country or region of the world. Trademark laws play a significant role in many countries franchise regulations. Because you have a registered federal trademark with the USPTO in the United States does not mean you have any trademark protection in other countries. U.S. brands have been surprised to find out that Canada has a completely separate trademark process, many times which is much more expensive to complete appropriately than the United States. Many international franchise regulations require that the franchisor has a trademark in that particular country in order to offer a franchise in that region.
Generally, international franchise regulations can be broken down into four categories – Disclosure Law, Relationship Law, Disclosure and Relationship Laws and Competition Law. Although there can be variations to each, these represent the primary categories. Disclosure Law is as it might seem, the requirement of the franchisor to provide information related to themselves, the business model and the relationship in an approved format prior to the franchisee making an investment in the franchised business. Relationship Law stems from English contract law which states an agreement is legally enforceable in cases where the contracting parties were perceived by the court to have intended it. This legal relationship doctrine operates in addition to consideration. Disclosure and Relationship Laws would be some combination of the two categories of legal structure between franchisee and franchisor. Competition law is a law that promotes or seeks to maintain market competition by regulating anti-competitive conduct by companies.
As you build your business and plan for international franchise growth, you should also build a plan for international franchise compliance. In most cases, the logical solution is to find suitable counsel in any given country you intend to sell franchises into who can provide support for franchise and other related legal matters. These points also speak to the benefit of finding and having a strong Master Franchise partner in any given country who can provide local market support, guidance and expertise for your expansion.
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FMS is a team of expert franchise consulting professionals based in Canada that provides solutions for franchise development, franchise consultation, and expansion of businesses globally.