Franchise Update Magazine Issue IV, 2015 | Page 64

GROWING YOUR SYSTEM

International
Managing
International Leads
There’s more to it than you think
BY WILLIAM EDWARDS, MICHELLE McCLURG,
WILLIAM GABBARD, AND SHANNA ALDRIDGE

I

t is the dream of many franchisors to
take their concept into other countries. As in the U.S. and Canada, the
lifeblood for expansion is generating leads
from various sources, processing them, and
signing a franchise agreement. And that is
where the similarities between processing
leads in the U.S. and abroad end.
As seen in the accompanying chart, getting an international lead from a broker, an
Internet lead site, or your franchise website
is only the start of a long and potentially
expensive process and journey to signing
a licensee agreement in another country,
involving many, many steps. The authors of
this article, with a combined 80-plus years
of taking U.S. franchise brands global, aim
to help you fully understand the difference
between getting, processing, and signing
U.S. and international franchise leads.
The first major difference is the terms
you will offer the international franchisee.
These are not set as they are in the U.S.
with the FDD. Internationally, you can
change the fees and royalties depending
on the country, even the potential franchisee. You can and will have to negotiate.
Of course, it’s best if you are consistent in
your terms, as international franchisees
talk, just as U.S. franchisees do!
Second, the level and difficulty of due
diligence on an international franchisee
candidate is significantly higher than at
home. Numerous U.S. laws and regulations
control the information you must acquire
about an international candidate before
you sign them. Here are two to be aware
of: 1) the Foreign Corrupt Practices Act—
you must know who you are dealing with,
who owns their company, and where their
money comes from; and 2) the Specially
Designated Nationals List—a list of the
“bad guys” and companies the U.S. Treasury Department has identified and that
you do not want to do any business with.
Third, the resources required to prop-

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erly evaluate and sign an international
licensee, along with the resulting legal,
staff, and travel costs before you receive a
fee are significantly higher than in granting a franchise at home.
Although CRM systems are becoming common and companies like FranConnect operate in several countries, the
culture in most countries does not lend
itself to candidates going online for most
of the interaction you will have during the
qualification process. Someone will have to
send emails and take long-distance phone
calls to get the information you need, and
to establish the relationship required to
do business abroad. Calls take time, cost
money, and sometimes require you to get
up in the middle of the night because of
time zone differences. In almost all other
countries business is done based on developed relationships (not transactional).
And emails often go to spam, so a call is
essential.
Does the candidate speak English? Not
only is this critical in the qualification and
signing stage, it is essential once the new
international franchisee comes to training
and starts operations. Otherwise, how will
they fully communicate with your staff—and
how will you fully transfer your franchise
business systems to them?
You will need to apply for new trademarks
in other countries. Your U.S. trademark
does not cover you. Before you market in
any other country, you will want to apply
for a trademark to cover your top 15 to 20
countries at the start. Your brand is everything. Protect it. Invest the money to secure
your brand in key countries and regions,
such as the European Unio