How to handle an unplanned overseas master franchisee enquiry
What happens when an inquiry to take your brand overseas arrives on your desk? Do you drop everything and focus on this new opportunity or do you follow a process to decide whether it is in the best interest of your business to spend time looking into the potential of international growth. What should you do?
When you look at a successful, fast-growing franchise the following are common elements:
- staying in control of the business with a clear business plan
- maximising revenue without unnecessary risks
- taking opportunities fully understanding the implications on the existing business
- recruiting that maintains a sustainable culture that mirrors the branding of the franchise system
- creating a great management team
- well protected trademarks and trade secrets
- understanding when growth can trigger significant economies of scale
- distinguishing hyper activity from good productive activity
- always having money in the bank and sustainable profits
In a nutshell, your franchise operates on good advanced planning.
So what can be wrong if an overseas business contacts your franchise management team, tells you that your business is everything that they possibly wanted and starts to reach for their cheque-book? You need to ensure that each inquiry is looked at carefully as it may be the best opportunity that you will ever come across. Equally your process needs to quickly identify applications which are wasting your time and diverting you and your management team from properly running your franchise.
1. IS THE ENQUIRY LEGITIMATE?
Why should you assume that the email or telephone call you have received is from an honest independent business person when in fact it could be a competitor or a variation on those famous Nigerian emails?
Just because the enquiry comes from overseas does not mean that you are to avoid requiring completion of an application form and then moving on to a confidentiality and nondisclosure agreement. At the early stages this may be completed informally but it is essential that you have a clear process.
2. WHO REALLY IS THE PERSON WHO HAS CONTACTED YOU?
Once you have established the party’s contact details, establish whether the person is an intermediary, the owner of a business or a free agent seeking that you engage them to look for a master franchisee.
Once you understand the status of the person it is wise to ask for independent confirmation. Austrade provides such a service however, for the sake of cost and speed, significant information can be obtained by contacting local in-country associations and requesting references. The website and LinkedIn page of the applicant should also reveal the name of clients, suppliers and referees that will need to be contacted discreetly.
It is important to keep digging until you receive a personal recommendation that you are satisfied with.
3. WHICH COUNTRY IS THE ENQUIRY COMING FROM?
The country details will immediately alert you to a range of cultural issues and in particular identify whether the concept of “yes” and “no” are understood terms and does the person that you are speaking with have the ability to use those terms correctly.
The proposed location of the master rights allows you to establish whether there is a safe and stable economic environment with cultural acceptance of the goods or services that your franchise provides. Most importantly, whether the taxation system within the country allows for foreigners, extraction of money and taxation treaties.
The country details will tell you whether negotiations are likely to be concluded within a relatively short period time or continue for three years or more. Starbucks took four years to conclude a deal in India.
Many franchisors are unaware of the conservative negotiation methods and owner’s regulatory authority restrictions which will cause inordinate delays even when both parties are fully cooperative.
4. TELL THE PERSON YOUR RECRUITMENT PROCESS
At an early stage it is important to explain to the person the process that you have for determining and granting a master franchise or regional development rights without disclosing any confidential information. This process allows you to understand whether the applicant will commit to the details that you have outlined.
Discuss the applicant’s commitment to:
- signing a nondisclosure agreement
- travelling to your head office for a discovery visit
- payment of funds in advance