Refocusing The International Franchising Viewfinder

International Franchising: A Different Perspective From the United States – The United States, although an open market without legal complications of franchising in other countries, has unique legal challenges for foreign franchisors.

By Erik WulffIFA:

Although those of us sitting on the United States side of the pond often view franchising as uniquely American, the reality is that franchising is an increasingly global phenomenon crossing many different borders–not just outbound from the United States. Consumer brands are being promoted cross borders globally, including many retail and service brands that emanate from other countries. And in connection with this global activity, much research and discussion takes place about the strength of various markets, and the advantages and disadvantages of pursuing those markets. Aside from issues relating to the size of market, economic growth, demographics and other commercial and cultural issues, the legal hurdles or challenges are not often addressed. Not surprisingly, a market which may be commercially very attractive may be difficult from a legal perspective or present unusual legal risks. Although one might be inclined to place major markets like China, India and Russia in this category, the United States itself presents a unique set of legal challenges and risks for the foreign franchisor.

Looking at the United States from the perspective of a foreign business person, it is undeniably the largest consumer market in the world and for many highly attractive. There are, of course, business challenges–an extremely competitive environment, a diverse population and demographics; large geographic territory; difficulty in developing brand awareness–but often the legal challenges give foreign business persons the most pause about expanding into the U.S. market. Anecdotal stories lead to a widespread perception that the United States has a mind-bogglingly-complex legal system with severe consequences for non-compliance; the United States is a litigious society, with disputes being litigated rather than resolved, and risks of class-action lawsuits with potential for huge jury verdicts; and U.S. laws seeking to reach conduct and defendants beyond its own borders.

Full article.

Leave a Comment

Your email address will not be published. Required fields are marked *