by Wynn Williams
last updated 14/09/2023
Next Stop - The World!
by Wynn Williams
last updated 14/09/2023
Franchise lawyer Katrina Hammon answers some common questions about overseas expansion
As a franchisor, once you’ve built a critical mass in New Zealand it’s logical to look overseas. But the way you structure your expansion needs to be tailored to each market’s laws and regulations. Granting master franchise rights to a local party is common, but there are many options for the legal and contractual approach to overseas growth. Here are answers to some common questions raised by successful franchisors.
Q. What comes first – legal advice, or finding a local party?
A. Over the last 20-plus years, I’ve advised franchisors in Australia and New Zealand who have successfully established a footprint in over 34 markets across the globe. Adopting a simple approach to high-level market due diligence will save you both time and money.
The majority of developed markets outside of New Zealand have franchise-specific laws or intellectual property laws that extend to control franchising, licensing and the use of brands. There are markets that require a franchisor to first have trademarks applied for, or registered, prior to market entry, or deem any agreements signed (even non-binding heads of terms) as illegal or unenforceable until the franchisor has registered with the relevant regulatory authority in that market.
Q. Is Australia the easiest market for a New Zealand franchisor to start?
A. For proximity and ease of travel, yes. But in all other respects, Australia should be carefully considered and treated the same as any other market. A well-informed and strategic process evaluating the relevant market is required. Australia is heavily regulated and there are important differences, not just in terms of the laws but also cultural nuances. In my experience, failing to respect these differences when interacting with franchisees and customers often leads to growing pains in a new market.
Q. I’ve got my trademarks registered in New Zealand – will that protect my brand in other markets globally?
A. The short answer is no, trademarks must be registered in the relevant market. Ahead of global expansion, franchisors should evaluate which markets they consider a priority and apply for registration of trademarks. New Zealand trademarks can be used as the basis for those registrations. The Wynn Williams team can assist you with a global brand registration and protection strategy.
Q. Our concept is successful here – can we provide financial modelling based on New Zealand for other markets?
A. Where a franchisor provides financial modelling or projections, care must be taken to ensure that it is an accurate and fair reflection of the actual performance experienced. For example, providing historic data or projections based only on the highest-performing franchisee would be an issue. Any key information relevant or irrelevant to the specific markets must be highlighted: eg. labour and taxation costs which are higher in certain markets than in New Zealand.
In my experience, the majority of claims against franchisors stem from the recruitment or sales process and, specifically, the information and representations made during the recruitment of a local market master franchisee and franchisees. Wynn Williams can assist with the review of recruitment collateral and the process adopted to onboard franchisees to reduce the risk of a successful claim.
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