If becoming involved with a fresh name and product that’s unfamiliar to most Americans piques your interest, take into consideration the below do’s and don’ts when mulling over the purchase of a foreign franchise:
1- thoroughly investigate the franchise you are considering buying into. Telephone or send an email to the company’s corporate offices and ask that all pertinent and available materials related to its history, product, performance record, and future goals to be sent to you by mail. Be sure you have a good handle on how this particular foreign franchise is doing in countries other than the U.S.;
2- there’s always a master licensee involved in the domestic branching out of a foreign franchise - you’ll need to contact the U.S.-based master licensee for the foreign franchise you’re interested in investing with to see how the franchise’s existing U.S. locations are performing. You also need to find out if the master licensee is competent and knowledgeable enough to assist you with your franchise should you hit a rough spot in terms of sales or finances;
3- understand that foreign franchises work in essentially the same way American ones do. The same disclosure prerequisites are required in all transactions - the Uniform Franchise Offering Circular (UFOC) is presented to the franchisee, which lays out such items as litigation and bankruptcy history, trademark, patent, and copyright information, and the mutual obligations of both the franchisor and franchisee. Also, the same intensely specific codes of conduct that are used in the expansion of an American franchise apply during the sales process of a foreign franchise;
4- you must conduct an extensive amount of research on whether or not the foreign franchise will fly in the area you want to set up shop in. Foreign franchises in the U.S. (or anywhere, for that matter) can go in either direction - you could have a resounding, smashing success, due to the fact that you’ve introduced something new and exciting to a city burned out on the overly familiar and consumed, or you could have a massive flop, one in which potential customers are scared off by the unfamiliar. Understand the cultural trends of the area you see as ripe for development;
5- if you’re the bold and pioneering type and wish to be the 1st-ever U.S. franchisee of a foreign franchise, you face a potentially rocky road ahead of you. However, there are some concrete benefits to being the 1st franchisee. Since you’re essentially acting as a guinea pig of sorts, many franchisors will grant you price cuts on such things as marketing materials and even, in some cases, the usually steep initial franchise fee.
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