International Franchise Expansion from the UK
The use of Franchising to Expand Internationally
Research has been conducted on the reasons why US based franchisors have sought to expand overseas as well as the perceived disadvantages of international expansion. The conclusions which the research reached are set out below:-
| Reasons for Overseas Expansion | % |
| Additional growth/expansion | 28.2 |
| Added revenue/profits, improved ROI, or other direct financial gain | 28.0 |
| Larger market, more market penetration, more market share | 16.9 |
| International identity, greater name recognition | 10.5 |
| No/less competition | 5.9 |
| Untapped potential | 5.1 |
| Added exposure (in general) | 5.1 |
| Other categories of benefits | 17.5 |
| No benefits | 7.9 |
| Cell | Cell |
| Perceived Disadvantages | % |
| Lack of control/accountability | 35.5 |
| Difficulty of supporting/servicing franchisees, operating challenges | 14.4 |
| Cost/expense | 13.6 |
| Distance, time difference | 10.0 |
| Culture/language difference, difficulty of judging local needs | 9.5 |
| Government regulations, laws difficulty of repatriating royalties | 8.7 |
| Quality control | 6.0 |
| Logistics/supply problems/cost | 5.4 |
| Resource drain, spread too thin | 4.1 |
| Time needed to develop/implement a plan | 3.5 |
| Increased risks / uncertainties | 3.3 |
| Complications/trouble (in general) | 3.0 |
| Adapting product/marketing to new markets | 2.7 |
| Other categories of drawback | 15.7 |
| No drawbacks | 1.9 |
Notwithstanding the difficulties facing those businesses using franchising as a method of international expansion, franchising is increasing in popularity as a means of international expansion. Indeed many businesses who do not use the franchising format in the United Kingdom adopt one of the franchise methods set out below to expand overseas. These methods are:
- Direct franchising – whereby a business grants franchises to franchisees in another country;
- Establishing a subsidiary/branch in the target country which grants franchises to franchisees in that country;
- Establishing a joint venture with a local partner to grant franchises;
- Entering into a master development or master franchise agreement. Under a master franchise agreement the master franchisee undertakes to grant sub-franchises to third parties. Under a master development agreement, the master developer undertakes to open outlets itself rather than by way of sub-franchising.
More Information
- International franchise Expansion from the UK
- Direct Franchising in the UK
- Branch/Subsidiary Franchising in the UK
- Joint Venture
- Master franchise and master development agreement
- Basic Information about the UK for non-UK Franchisors
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- What are the relative tax advantages of a representative office, a branch and a subsidiary?
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