what is international franchising

International franchising is a strategic way to reduce dependence on domestic demand and grow new, future revenue and profit centers worldwide. Extending a brand globally through franchising involves low risk, requires minimal investment, and offers a huge upside potential for scaling capabilities.

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Why to invest in a franchise?

Why You Should Buy a Franchise Instead of Starting Your Own

• Collaboration. The franchise organization model offers the franchisee the ability to grow under a common brand and share in the benefits of a larger group of business owners.
• Franchising offers a better chance to succeed. The U.S. ...
• Happy franchise owners make more money. It’s been said that if you love what you do, you can’t help but succeed. ...

How to open a franchise?

Tips for attracting franchisees

• Optimize your website. Create a page on your website dedicated to explaining franchising opportunities at your company. ...
• Target key locations. Use location-based online and print ads to find potential franchisors that are local to areas you have already scouted.
• Engage your current franchisees. ...

Why do companies franchise?

Why Franchise?

• Lower Cost. Unlike employees, franchisees make an initial payment in return for becoming a part of your business and then they continue to pay you a percentage of their revenue, ...
• Simpler Management. ...
• Faster Expansion. ...
• Better Market Penetration. ...
• Greater Commitment. ...
• Less Recruitment. ...
• International Potential. ...

What is international franchising Bill Rosenberg?

What is Franchising? The Rosenberg International Franchise Center (RIFC) explores and advances the understanding of franchising through academic research, education and outreach. Franchising represents over $674 billion of the business conducted in the United States of America annually.

What are the types of international franchising?

Over the last 20 years there has developed three basic vehicles in which a U.S. franchisor expands internationally: (i) directly; (ii) joint venture; and (iii) master franchising, with master franchising being the most common method.

What is the advantage of franchising internationally?

International franchising is a strategic way to reduce dependence on domestic demand and grow new, future revenue and profit centers worldwide. Extending a brand globally through franchising involves low risk, requires minimal investment, and offers a huge upside potential for scaling capabilities.

What is the meaning of the franchising?

A franchise (or franchising) is a method of distributing products or services involving a franchisor, who establishes the brand's trademark or trade name and a business system, and a franchisee, who pays a royalty and often an initial fee for the right to do business under the franchisor's name and system.

What is the purpose of the International Franchise Association?

As the world's largest membership organization for franchisors, franchisees and franchise suppliers, the International Franchise Association (IFA) is proud to provide industry-leading events, advocacy, education and growth opportunities to the franchise community.

What are the advantages and challenges of international franchising?

Many businesses have flopped because they failed to take account of the financial risks involved.Advantage: Exposure to New Markets. ... Advantage: Favorable Regulations. ... Disadvantage: Cultural Differences. ... Disadvantage: Compliance Challenges. ... Disadvantage: Financial Risk.

What are the issues in international franchising?

In addition to pre-sale disclosure regulation, international franchising is affected by a wide range of laws, including those which relate to trademark, antitrust, contract, tax, and technology transfer issues, currency control, foreign investment, import and export restrictions, and dispute resolution.

What are the 4 types of franchising?

The four types of franchise business you can invest inJob or operator franchise. These owner operator franchises are usually home based, which keeps overheads down to a minimum. ... Management franchise. ... Retail and fast food franchises. ... Investment franchise.

What are the characteristics of franchising?

To see if franchising will suit you check out these nine characteristics:Strong desire to improve business skills.Likes to use proven systems/structure.Believes that customers must be highly valued.Some entrepreneurial spirit.Open to change and feedback.Real ambition to grow a business.Committed to the power of a brand.More items...•

What's the biggest franchise in the world?

McDonald's Since its beginning in 1954, McDonald's has become the center that other fast-food franchises orbit around. Yet, the presence of so many imitators has done nothing to quell its global success. The company enjoys over $90 billion in global sales and represents the largest franchise network in the world.

What are types of franchises?

The five major types of franchises are: job franchise, product franchise, business format franchise, investment franchise and conversion franchise.

Is KFC a franchise?

KFC Franchise is owned by Yum! brands, global franchisor whose 3 restaurant brands, Pizza Hut, Taco Bell and KFC, are amongst the largest and most well-known franchises in the world. They are leaders in their respective industries - Pizza, Mexican and chicken. Yum!

Is Starbucks a franchise?

Starbucks Coffee doesn't franchise. Even though franchising is a classic, successful growth strategy for myriad beloved, familiar brands, Starbucks does not grant franchises. It's not because franchising isn't a time-tested model for growth. Many companies offer franchises.

What are the advantages and disadvantages of international licensing?

Exhibit 15.3AdvantagesDisadvantagesDoes not require capital investment or presence of the licensor in the foreign marketRevenues are usually more modest than with other entry strategiesAbility to generate royalty income from existing intellectual propertyDifficult to maintain control over how the licensed asset is used1 more row

What franchise system is better local or international?

A local brand is often considered more trustworthy and desirable; especially given that not everyone has travelled the world and is aware of a particular international brand.

What are the benefits of franchising your business?

Advantages of FranchisingFranchising provides expansion capital.Avoids employee related problems.Accelerates expansion over wide area.Franchisee operators are motivated to succeed.

What is licensing and franchising in international business?

Franchises and licenses are both business agreements in which certain brand aspects are shared in exchange for a fee. However, a franchising agreement pertains to a business's entire brand and operations, while a licensing agreement only applies to registered trademarks.

Why do we need international franchises?

International franchises can provide the opportunity to take advantage of growing global markets, although the franchisee will need to overcome the hurdles associated with adapting to the ways of a new country . Cultural Adaptation: Franchises provide the business owner with a full range of support services.

What is a franchise business?

Franchisers sell a defined, proven business format or method of operation, offering a product or service that has sold successfully. An independent business is based on both an untried idea and operation. Franchisees can often buy lower-cost goods and supplies through the franchiser, resulting from the group purchasing power of all the franchises.

Why do franchisees need to be good?

If the franchisee is not capable of running a quality business or does not have proper funding, this could curtail success.

What does a franchiser do?

A franchiser also provides management assistance, including accounting procedures, personnel and facility management. An individual with experience in these areas may not be familiar with how to apply them in a new business. The franchiser helps a franchisee overcome this lack of experience.

Why are franchises so expensive?

Franchises can be costly to implement. Also, many franchises charge ongoing royalties cu tting into the profits of franchisees. Franchisors usually require franchisees to follow their operations manual to a tee in order to ensure consistency. This limits any creativity on the part of the franchisee.

What is franchising counsel?

Counsel: International franchising experts help companies understand a foreign market before expansion. Consultants advise businesses on a number of subjects, from financing to culture gaps.

What does it mean to own a franchise in another country?

Change of Lifestyle: Owning a franchise in another country can result in a new and exciting way of life. Franchisees from a cold climate may relish the opportunity to move to a warm, sunny locale to open a business. Some may also look forward to expanding their horizons by experiencing and assimilating into a new culture.

What is international franchising?

International Franchising, sometimes known as Master Franchising or Master Licensing, is a method of expansion that new or established franchises can use to move into new geographical areas and markets. Unlike franchising in the franchisor’s home country, where the franchisor grants the franchisee a license to use the marketing, ...

What is the easiest way to franchise internationally?

Master franchising is often considered to be the easiest and quickest way to franchise internationally, and it has many benefits, as most of the up-front capital required is invested by the master franchisee, making it a very affordable method of expansion at the start of the expansion process.

Why Choose The Franchise Company?

At The Franchise Company, we advise on international expansion strategies and have been involved in numerous international franchising projects over the last 25 years.

What is direct franchising?

Direct Franchising is a franchise model where the franchisor retains control and licensing of the franchise completely. In a direct franchising model, the franchisor continues their role in a very similar way to during domestic franchising. This kind of franchising requires a lot of resources and time on the part of the franchisor, as they will be providing the same level of training, recruitment and support to franchisees as the franchise expands rapidly and the difficulties of moving into a new market are overcome. Direct franchising is usually carried out remotely due to the centralised nature of the model, and works better in expansion to markets with similar cultures, languages, legal systems and regulations, such as between Canada and the USA, or the Scandinavian countries.

What is the most popular international franchise model?

Different Types of International Franchise Models. Master Franchising is one of the most popular international franchise models, and is considered to be one of the simplest ways to expand a franchise overseas. In a master franchising model, the franchisor chooses a master franchisee for the target country or region, ...

Do master franchises pay royalties?

Owners of master franchises are often willing to pay large fees for exclusive rights to the franchise operations in their country, as it represents a significant opportunity for growth, as they have the opportunity to recruit franchisees of their own, run franchises themselves and collect royalties from their sub-franchisees.

Do master franchisees have to be controlled by the franchisor?

The standards, processes and systems that are carried out in franchises in the new region are not controlled by the franchisor once both parties sign the master franchise agreement, and this can be difficult for some business owners, or not be compatible with the business model for certain sectors and companies.

Can a franchisor expand into another country?

Although a trademark is federally registered in the United States, it may not have any protection in other countries. Before expanding a franchise to another country, a franchisor should retain an intellectual property attorney that is familiar with the laws of the country to determine whether a trademark is already registered in that country. If not, a franchisor may not be able to expand into that country using their existing trademark. Also, although a trademark may be available in that country, a franchisor should determine if their trademark is culturally appropriate within that country. Many words, phrases, logos, and images used within the United States may have secondary meanings in other countries or may be seen as derogatory or offensive. It is important to determine this before franchising internationally to avoid any public relations issues.

Is there Foreign Interest in the Franchise?

An important question to address before franchising internationally is whether there has there been any interest in the franchise from a specific country. Many brands started franchising in the United States because someone approached them with interest in buying a franchise. A franchisor may also ask themselves why expand into another country at this time, is there someone interested in purchasing the rights to the entire country, and is there a sales team capable of soliciting franchise sales in the country?

What does franchising mean?

The word "franchising" is derived from the French verb, franchir, which means to make free or give liberty to, and often referred to freedom from some restriction, servitude or slavery. Franchising can be divided into two major categories: business format franchising and product / trade name format franchising.

Why is franchising important?

Franchising plays an important role in providing employment to individuals without a higher education or specialized skills.

What is social franchising?

Social franchising is the application of the business format franchising model to address societal issues such as joblessness, drug use, poverty, disease, sanitation, access to potable water, lack of education, etc. While still an emerging business model, social franchising has tremendous potential to contribute to emerging economies in Africa, ...

What is business format franchising?

Business format franchising is defined by the International Franchise Association (IFA) as a marketing method in which the owner of a product or service, known as the "franchisor," offers the right to operate and manage his product and service to others, the "franchisees," in return for a fee and ongoing royalty payments.

How much does it cost to start a franchise?

Typical startup costs range from $25,000 to over $3 million.

Where is Rosenberg International Franchise Center located?

The association is based in Washington, D.C. The Rosenberg International Franchise Center at the University of New Hampshire maintains the largest financial database of US and international publicly listed franchise companies.

Is McDonald's a franchise?

Over 80% of McDonald's restaurants worldwide are franchised, i.e., they are owned and operated by local businessmen and women. Other pioneers adapted Ray Kroc's franchising business strategy of providing high standards of quality, friendly service, cleanliness and value.

What is franchising in business?

Franchising is a form of marketing and distribution in which the owner of a business system (the franchisor) grants to an individual or group of individuals (the franchisee) the right to run a business selling a product or providing a service using the franchisor's business system.

What is franchise part of?

Individual franchises are part of a brand’s ecosystem, a network that is a pooling of resources and capabilities.

What are the different types of franchises?

There are three main types of franchises. • Most franchises fall under the business format type where the franchisor licenses a business format, operating system, and trademark rights to its franchisees. • The second type of franchise is product distribution, which is more of a supplier-dealer setup.

How long do franchise fees stay collected?

In addition, fees are collected regularly for as long as the franchisee owns the franchise. In exchange for these payments, the franchisee will receive continued support such as marketing assistance and ongoing training opportunities.

How did Singer Manufacturing Company help?

The royalties earned from the license rights helped offset manufacturing costs and, because each franchise was self-financed, Singer Manufacturing Company was able to tap into the entrepreneurial attributes and local market knowledge of the franchisees to help Singer become more successful than he could have by himself.

How did franchises help the United States?

Car manufacturers who had been spending enormous amounts of capital tooling their assembly lines found they could develop retail distribution networks using capital provided by independent dealers. Oil companies such as Standard Oil and Texaco also started granting franchises to convenience stores and repair mechanics across the U.S. to efficiently expand their reach.

When purchasing a franchise, is the franchisee required to comply with strict guidelines and rules regarding the operation of the business?

When the purchase of a franchise is made, the franchisee is required to comply with strict guidelines and rules regarding the operation of the business. These guidelines are in place to maintain brand consistency.

Why is international business franchising important?

International business franchising gives a business owner the opportunity for growth in global markets, especially when their business franchise might offer a new product or service that’s currently unavailable in that region. Bringing in a new exciting option can create substantial profits as people enjoy the new experience.

What is the purpose of franchising?

The Purpose of Franchising. The purpose of franchising is, at its root, a method of marketing or advertising a company’s goods and services. It can be viewed as a growth strategy, giving the franchisor control over expansion yet limiting their own capital investment since the franchisee takes on that cost and risk.

What is franchising restaurant?

International franchising, in simple terms, is when a business allows another entity to use its licensed procedures, processes and business model to start their own copy of the existing business in another part of the world. According to this international franchising definition, ...

What is the advantage of franchise?

For the international franchisee, the first advantage is that opening a franchise immediately makes you a business owner but with the tools for success that aren’t available to someone starting their own business. The franchisor provides the brand, business plan, processes and guidelines and often offers training for franchisees in business principles they may not be familiar with.

What are the advantages of international franchising?

For the international franchisor, the advantages include worldwide expansion of the business without giving up too much control or requiring extensive capital; the franchisee provides the capital resources needed to start up their franchise. The legal risk is thus lessened for the franchisor, ...

What are some examples of international business franchises?

Examples of international business franchises include: Restaurant chains, such as McDonald's, Burger King and Pizza Hut. Hotel franchises, such as Marriott, InterContinental and Choice Hotels. Real estate franchises, such as RE/MAX and Century 21. Service franchises, such as H&R Block, Merry Maids and Interim HealthCare.

Is it easier to get capital for a franchise?

Franchising offers a higher chance of success than an independent start-up, and it’s generally easier to obtain capital for a franchise due to its success rate. However, the franchisee must be prepared for anything; there's no guarantee of success built into a franchise agreement.

What Is a Franchise?

A franchise is a type of license that grants a franchisee access to a franchisor's proprietary business knowledge, processes, and trademarks , thus allowing the franchisee to sell a product or service under the franchisor's business name . In exchange for acquiring a franchise, the franchisee usually pays the franchisor an initial start-up fee and annual licensing fees .

What does a franchisor receive?

Finally, the franchisor receives ongoing royalties or a percentage of the operation's sales. A franchise contract is temporary, akin to a lease or rental of a business.

What Are the Risks of Franchises?

Disadvantages include heavy start-up costs as well as ongoing royalty costs. By definition, franchises have ongoing fees that must be paid to the franchisor in the form of a percentage of sales or revenue. This percentage can range between 4.6% and 12.5%, depending on the industry.

How Does the Franchisor Make Money?

Typically, a franchise agreement includes three categories of payment to the franchisor. First, the franchisee must purchase the controlled rights , or trademark , from the franchisor in the form of an upfront fee. Second, the franchisor often receives payment for providing training, equipment, or business advisory services. Finally , the franchisor receives ongoing royalties or a percentage of the operation's sales.

What is franchise contract?

Franchise Basics and Regulations. Franchise contracts are complex and vary for each franchisor. Typically, a franchise agreement includes three categories of payment to the franchisor. First, the franchisee must purchase the controlled rights, or trademark, from the franchisor in the form of an upfront fee.

How long does a franchise contract last?

It does not signify business ownership by the franchisee. Depending on the contract, franchise agreements typically last between five and 30 years, with serious penalties if a franchisee violates or prematurely terminates the contract.

When a business wants to increase its market share or geographical reach at a low cost, it may franchise its product?

When a business wants to increase its market share or geographical reach at a low cost, it may franchise its product and brand name. A franchise is a joint venture between franchisor and franchisee. The franchisor is the original business. It sells the right to use its name and idea. The franchisee buys this right to sell the franchisor's goods or services under an existing business model and trademark .

Determine The Legal Requirements For The Country of Expansion

Is There Foreign Interest in The Franchise?

Is The Brand Strong Enough?

Securing Intellectual Property When Franchising Internationally

• Although a trademark is federally registered in the United States, it may not have any protection in other countries. Before expanding a franchise to another country, a franchisor should retain an intellectual property attorney that is familiar with the laws of the country to determine whether a trademark is already registered in that country. If n...

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