Overseas growth, economy top of mind at IFA convention

Franchisees eye international growth

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Growing overseas was clearly a topic of interest during the convention, with attendees packing standing-room-only into sessions offering insight.

Of the Top 200 franchising chains in the U.S., 34 percent of their units are now in other countries, and that number is expected to climb, said Philip Zeidman, senior partner with DLA Piper LLP. “For those of you who are not yet international, the writing is on the wall,” he said.

Nearly 80 percent of IFA members franchise internationally, for example. The trend has been fueled in part by lack of access to credit in the U.S. through the recession, but also growing affluence in foreign markets and increasing acceptance of Western brands, particularly by young people, said Zeidman.

Steve Devine, president of Johnny Rockets’ international division, emphasized the need for doing research into potential markets, tapping into data offered by the Central Intelligence Agency, as well as sources like Euromonitor and the International Council of Shopping Centers.

In addition to the laws specific to each country, franchisors should understand the various quirks of specific regions. Russia, for example, is known for red tape, so patience is required. “It’s a painful place to do business and a corrupt market,” Devine said.

In Asia in general, Devine said, “An agreement is never really an agreement.” And trademark and patent risks exist everywhere. Johnny Rockets is still battling a trademark issue in Brazil, where a competitor opened a virtually identical restaurant called “Rockets.”

Key in any decision to branch out internationally is identifying risks, like whether there is an existing supply chain and how cash will be repatriated.

But the most important factor is finding the right franchise partner overseas, he said. “It takes a brand champion to sell your brand internationally.”

Jeff Brimer, special counsel with Faegre Baker Daniels LLP, outlined legal hurdles for international franchising, urging franchisors to proactively and aggressively protect their intellectual property. Seek out local counsel to be sure you’re complying with country-specific laws and regulations, he said, but also be aware of U.S. laws that affect international business, such as the Foreign Corrupt Practices Act, the Patriot Act and various export/import regulations.

 “Be prepared for things to take longer,” said Brimer of international growth. “And plan for contingencies.”

The annual IFA convention will be held next year in New Orleans.

Contact Lisa Jennings at lisa.jennings@penton.com.
Follow her on Twitter: @livetodineout