Business
should consider having the governing law
of the agreement be the most appropriate
law depending upon the issue, with some
matters being determined by the law of a
third jurisdiction, acceptable to all. While the
governing law provision of the agreement will
be more complex than usual, the extra comfort
level of the parties will make it easier to finalise
the agreement.
Of course, it is not always possible to choose
the preferred applicable law. For example,
under the Chinese jurisdiction we note a
strong protection of the franchisee instead of
a safeguard of the foreign investment. In this
case the only way to arrange a good deal is to
charge an experienced local professional with
the assignment.
Franchisors need
to consider their
true motivation
for international
expansion
Under a more specific perspective, arguably a
franchisor’s most important asset is its brand,
particularly its trade name and trademarks.
Franchisors considering franchising overseas
should contemplate certain questions:
•
•
•
•
Will the brand translate to another
country, or might it need to be tweaked or
translated to make it more appropriate for
a new market?
Is there another business in the target
country already trading with the same or
similar name?
Are appropriate domain names and social
media handles available in other countries?
What intellectual property will need to be
formally registered and what (if any) may
achieve automatic protection?
14
The laws governing intellectual property in
different jurisdictions can vary widely. Those
considering international expansion should
ideally consult both their own brand protection
specialist and one in the target market, in order
to determine what protection will be required,
gain an understanding of the process, costs
and timescales to achieve it and whether there
are likely to be any issues. In the initial stages, it
is a good starting point to carry out searches of
relevant trademark registers, local trade press
and wider internet resources.
A well-established franchisor is likely to have
a robust, well-drafted franchise agreement
for its home territory. Although it may work
well, the agreement will need to be reviewed
by a local lawyer in the relevant territory into
which the franchisor is expanding and tailored
accordingly. A few provisions may need to
be altered and thought should be given to
any payment mechanisms, particularly when
exchange rates are involved. This point should
be considered as currency fluctuations can
make a substantial difference to monies paid
overseas over a long period
.
Furthermore, it is also important to take advice
on the enforceability of obligations, restrictions,
non-compete clauses and guarantees within
other countries. Local lawyers should be able
to provide guidance on this and on jurisdiction
clauses. Certain countries have clear laws
relating to franchising, for example, the US,
Australia, Canada and several countries in
Europe have a strict approach to laws relating
to business generally, such as competition
rules, foreign trade and investment.
In terms of the operation of the business itself,
it is sensible to check whether there are any
particular laws relating to the provision of
the services or products which form the core
business. Many of the legal considerations
also involve practical, commercial elements.
Distance, time, language and culture can vary
substantially.
In conclusion, the expansion of business by
means of the franchising model is not easy
for the entrepreneur, who must adapt his/
her standard approach to the necessities
of the specific foreign market. There may be
many matters to consider depending on the
circumstances and there is a lot to think about,
but with the right approach and appropriate
advice, international expansion can be exciting
and successful.
with the right approach and appropriate
advice, international expansion can be
exciting and successful
Patrizia Sangalli assists both Italian and international companies in
commercial and corporate matters, specifically mergers and acquisitions
(M&A), drafting international agreements, international commercial litigation,
arbitration ad hoc, ICC, UNCITRAL, CAM and LCIA transactions. Patrizia
Sangalli’s practice includes advising on international commercial arbitration
and litigation in several continental and common law jurisdictions.
[email protected] - www.sdglex.com/eng/
Dario Rizzi has a degree in economics from the University of Bergamom
where he later completed a degree in law. He worked as a company director
in the construction and services industry. He also cooperated for many years
with international law firms, focusing his activity on corporate, bankruptcy
and commercial law.
[email protected] - www.sdglex.com/eng/
15