Franchising for franchising’s sake won’t work in foreign markets. It must be done properly. A franchisor has a number of decisions to make before establishing a toehold in another country. To be successful, the franchisor will need to determine which franchise model it will follow, who it will partner with, and how it will modify its materials and concept to appeal to another culture. The franchisor must also develop the support system that will keep everything humming, along with the legal documents that will ensure that the business is run properly.

At the top of the franchisor’s list is determining which type of franchise model will work best in developing a franchise system in another country. After all, signing individual franchise agreements to individual franchisees in another country can be terribly inefficient. Each franchisee will have to be screened and selected by the franchisor. He or she will then have to come to corporate headquarters for training; the franchisor will have to help identify and set up individual locations in another country; and the team at each site must be trained. As you can see, this is terribly difficult to do and will strain the franchisor’s support system.

This isn’t the only option for lunching franchise opportunities overseas. Actually, the master franchisee or master development franchise agreement works best in international expansion. In this set up, the franchisor sells the rights to develop a territory that will encompass many franchise outlets to one master franchisee. The master franchisee is like a mini franchisor that sells franchise agreements to sub franchisees, who will establish individual franchise outlets. These sub franchisees pay the initial franchise fee and ongoing royalty payments to the franchisor, but the master franchisee will have earned a portion of it, thanks to its support, training, and site development, and other activities. The master franchisee also helps the franchisor and franchisees clear regulatory and legal hurdles that will govern the business.

In short, the master franchisee or master developer is the most appropriate method of market penetration for the following reasons:

• ?Its efficiency in establishing a global network and family of franchisees.

• The master franchisee is required to provide the financial resources to establish and exploit the business development system. Whatever these resources are, they must be found by the master franchisee.

• The master franchisee is responsible for staff recruitment for the pilot as well as his or her own business organization. This blends the franchisor’s business development system into local conditions through the master franchisee’s local knowledge.

In addition to the people, a global franchise system must have the organization to launch a foreign venture. It needs to have a mature domestic infrastructure in place. Without a strong base from which it can build, the entire system will be strained and could even collapse. Think about it: If a franchisor based in Tampa can’t work well with its franchisees in Portland, how will it connect with its franchisees in Tokyo? If its franchisees in Austin have a hard time understanding its operating manuals, how will the franchisees in Berlin feel?

The franchisor must adapt its domestic products and services to a foreign market. This requires some cultural sensitivity, because the business will have to appeal to another culture. (This is another way a master franchisee can help.) You don’t want to change the business so much that it isn’t recognizable to anyone familiar with your brand, but you don’t want to be so pure or inflexible that your products or services don’t appeal to customers outside of the United States.

This is an area where, early on in international development, the waters were littered with franchisors’ bad decisions. Domestically, one of the strengths of franchising is the operating plan in which some things are inviolate. The franchisor won’t change anything -fees, products, or services. Because franchisors were committed to what works, they tried to do the same things internationally. But they needed to be more flexible. Franchisors are learning that being flexible internationally is an asset, not a liability.

Language is another important factor. Marketing materials, advertising, training materials, and operating manuals must be translated. This has to be done well to ensure that the message you intend to send actually gets across. If potential customers don’t get your slogan, or if the employees don’t understand the operating manuals, they may as well be written in English.

All legal documents should be in place, too. This not only applies to the agreement your master franchisee signs, but also to the subfranchisee agreements, the documents that cover your trademark and your right to conduct business in the countries you choose, and any papers you need to make your U.S. business work internationally. Each country or economic unit, such as the European Union has its own requirements for operating a franchise within its borders, so you’ll need to know what they are and then conduct your business according to their regulations.