International Franchisors Inbound

Mondaq News Alerts:

Franchising has developed in Australia through well known international brands. Foreign Franchisors are looking to Australia and New Zealand as potential markets to expand their brand.
A number of foreign Franchisors have now successfully entered the Australian market via a variety of business arrangements, such as:

These are:

· Master Franchising;
· Direct Licensing to a single or multi unit Franchisee;
· Area Development Agreements;
· Partnership, Joint Venture or Partnering Agreements.

· Master Franchising
This is the most common model adopted by foreign Franchisors. The advantage is that effectively the obligations of the foreign Franchisor, are taken up by the Master Franchisee.
An advantage to the foreign Franchisor is that it is not contracting directly with individual Franchisees and therefore, legal liability, risk and possible action, rest with the Master Franchisee under Australian law.

The Master Franchisee becomes responsible for compliance with the Franchise Code under the Trade Practices regulations, recruiting Franchisees, meeting performance criteria, training and support of Franchisees, and all associated costs of establishing infrastructure to ensure the system operates successfully. Foreign Franchisors may already have world wide brand recognition and systems in place which can be used to support the Master Franchisee.

The risk ultimately is choosing the right Master Franchisee. It can make or break the successful roll out of the brand. A disadvantage of Master Franchising is that, although there are controls via the Master Franchise Agreement, the Franchisor is one step removed from practical control and face to face management is left primarily to the Master Franchisee. If they truly have the ability, personality and skills they will succeed. If not, it can be a disaster.

Full article.

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