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If you are running a successful franchise in New Zealand and feel you have exhausted your expansion opportunities, going overseas may be your next move. Expanding overseas is a great way to grow your business and tap into a new market. However, like with any business decision, there are some issues that you should consider. This article will discuss the benefits of expanding overseas and any issues that may arise from this.
Benefits
New Market
Franchising offers a better chance of success overseas than a regular business expanding. This is because your franchisee will have local knowledge of the market and leverage this to increase sales. Expanding overseas also allows you to take advantage of an entirely new market. Your new market may be unfamiliar with your business model, therefore, allowing you to promote a new product to a new audience. New products do very well as people are keen to try out something they have never seen before. For example, your burger chain may be the first in a new country, allowing you to introduce the locals to a new product. This may bring about ‘hype’ around your product and help you bring in increased profits.
Easier Regulations and Tax Obligations
Another benefit of expanding your franchise overseas is that you may be in a country where the regulations are easier on your business. This could mean that your business is in a better position to sell to consumers. For example, some countries may allow you to open shops in areas that would not be allowed in New Zealand. Accordingly, this allows you to tap into not only a new market but also a new demographic. You may also be able to save money on taxes if the country you are expanding into has fewer tax obligations.
Issues
Issues With Franchises
The main issue that franchisors face when expanding into a new country is ensuring their franchisees are compliant with their agreements. It can be hard to keep tabs on franchisees when you are based in another country. That is why you must have transparent communication systems with your franchisees. The last thing you want is a franchisee going rogue and modifying your branding. You will also want to have sound payment systems in place to make sure that your franchisee is paying your franchise fees correctly and on time.
Compliance Issues
On the flip side, compliance issues that may crop up when expanding your franchise overseas are regulatory and compliance issues. Other countries may have different regulatory laws and practices, which may mean your business will need to change. These different aspects could affect all parts of your business, including:
- human resources;
- policies;
- employee rights and benefits; and
- product safety.
This list does not include every regulatory issue that may come up, so it is important that you know those that affect your business. The best way to prepare for an expansion overseas is to hire local lawyers to precisely tell you what you need to do to comply with the regulation.
Financial Issues
An issue that many business owners overlook when dealing overseas is the financial risk. This includes things like supply chain logistics and currency exchange. It may not always be possible to source your inputs in your expansion country, causing you to source them from New Zealand. This will add more cost to the process, which could make it unprofitable for your franchisee. Currency exchange rates can also make your franchise fees unfavourable in comparison to New Zealand. The best way to prepare is to map out how you want your franchise to run in a new country and whether it remains profitable and effective.
Continue reading this article below the formKey Takeaways
Many franchise owners look to overseas expansion when wanting to grow their business. Expanding internationally has its fair share of benefits but can also lead to some issues. The best way to prevent these issues is to conduct proper due diligence to make sure you are fully prepared when expanding overseas. In particular, make sure to note any regulatory issues you may face and any potential supply chain problems. It is also essential that you set up a communication system with your franchisee.
If you are looking to expand your franchise overseas, our experienced franchising lawyers can assist as part of our LegalVision membership. You will have unlimited access to lawyers to answer your questions and draft and review your documents for a low monthly fee. Call us today on 0800 447 119 or visit our membership page.
Frequently Asked Questions
Yes, all businesses will have to get registered in the country you are franchising to.
Your franchise fees may be subject to a tariff when it comes in from overseas, depending on the country it comes from.
If you cannot check up on an overseas franchise regularly, then having someone do this for you can be a good idea. This is to make sure that your franchise is running smoothly.
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