News & Articles
Feb. 22, 2017
Export Your Franchise and Leave your Brand Home
A simple and creative way franchisors can take their franchise international.
By Ed Teixeira
When an individual or company from another country displays an interest in importing a franchise into their country a key factor is the opportunity to benefit from the franchise brand name.
However, in many cases the franchise brand name may not be well established even in the United States. Although the value of the franchise brand is important one shouldn’t dismiss the value of the franchise system and its operational processes, manuals, products and marketing programs. Simply stated the franchise, even without the brand name, can still have significant value. At first look this thought may escape most of us since we tend to place significant value on the franchise brand. However, unless we are dealing with a well known franchise with strong brand recognition, the actual franchise system can have a significant value in another country with or without the brand name. An analogy can be made to a manufacturing company that produces products under a private label brand for a retailer.
In a recent article Small Franchisors Can Go International Too one of my bullet points was:
“The franchisor could provide the operational and marketing knowhow and refrain from licensing the use of its brand name.”
Following up on this concept, here is how a consulting or licensing arrangement without the brand name could benefit both parties:
Benefits for the Franchisor:
・By providing the knowhow and system tools a small franchise can gain value from the franchise model that has been created.
・Can still receive a licensing fee and on-going royalty from a licensee
・The complete franchise model may not be transferable to another country but components of the system may have value by being adapted to another country
・A franchisor may not have an interest in going international but could still capitalize on the value of the franchise model
・By withholding the usage to their brand name a franchisor is protecting itself from damage to the franchise and brand name from a bad master licensee
・Provides a franchisor more opportunities by having an additional option for prospects from another country
Benefits for the Licensee:
・Can use their own brand name, which may be more appropriate for their own country
・Could still franchise but under a different brand name
・Will have the ability to utilize a developed business model complete with products, systems, manuals, marketing materials, etc.
・Can utilize the expertise of the franchisor in developing and administering a network of locations
・The transaction may be easier and less costly to complete in certain countries since it’s not a franchise transaction
In the event a licensing agreement is to be completed without the use of the brand name there are a number of provisions that should be included. Several of these provisions would mirror those found in a typical master franchise agreement. The following are some examples:
・Non-compete that restricts the licensee from doing business outside of their territory or county without the consent of the licensor( franchisor)
・Non-disclosure and confidentiality covenants that protect the licensor (franchisor) intellectual property. This would prevent the licensee from selling the IP to another entity or allowing its use by another company.
・The licensee may have an option to utilize the franchise brand name subject to certain stipulations
A number of franchisors have value in their franchise system excluding its brand name. In these cases there may be an opportunity to market this system value in other countries under a licensing agreement.
About the Author: Ed Teixeira has over 35 years of franchise industry experience as a franchise executive and franchisee and is a recognized franchise expert. He has served as a franchise executive in the convenience store, manufacturing and home healthcare industries and has licensed franchises in Asia, Europe and South America. Ed is currently Chief Operating officer of Franchise Grade which is the leading franchise marketing research firm in the world.