How to open a franchise abroad. Instructions

In 2023, the share of Russian franchises in the domestic market increased. If in their home country the situation for entrepreneurs is favorable, then in the international market it has become more difficult to open and develop a Russian business. Ramil Beydullaev, head of the franchising support practice at the Legal Group “Sovet”, spoke about how to open a franchise abroad in 2024.

Assess business prospects in a new region

Here the franchisor must analyze three aspects: the adaptability of the business model, the number of potential partners and the costs of implementing the project in the new country. Let's look at each aspect in detail.

Business model

When a business operates in Russia, it is aimed at a Russian audience. Marketing, concept and product line are built taking into account the local mentality, purchasing behavior, needs and other things. Some franchisors are copying the successful Russian business model and trying to expand it to new countries. Most often, because of this, the franchise does not survive in the new market.

To work abroad, you need to adapt the Russian business concept to a new audience and market characteristics.

A good example of adapting a franchise — brand "Dodo Pizza". It operates both in the CIS countries and in the countries of Asia, Africa and Europe. Each region has its own menu: in Germany they sell Tyrolean apple donuts, and in Vietnam they sell pizza with crab sticks.

Number of potential partners

Before throwing all your efforts into a new market, it is important to assess the number of potential partners. It all depends on the market capacity and the specifics of the business model. For example, if you are planning to open a chain of alcohol markets in a Muslim country, few locals will be interested in the company. But if the concept is unique and the success of the business model is supported by market analysis, you will be able to choose future partners yourself.

Implementation costs

As is the case with scaling a franchise in your home market, this requires free time and money. But to reach the international level, we need even more of them. This is due to additional costs for:

• analysis of a new market;
• adaptation of the knowledge base;
• registration of intellectual property objects;
• lawyers-consultants;
• logistics and customs;
• double taxation if there is no valid agreement on its avoidance between the Russian Federation and country X.

If, based on the results of the analysis of the market and its own resources, everything goes well, then the franchisor needs to choose a way to scale the company.

Decide the appropriate scaling method

Franchisors from Russia have three ways to develop their business abroad.

Agreement with a partner under Russian law

To launch an international franchise and work with foreign partners, an entrepreneur can use a legal model of relations such as an agreement under Russian law. In this case, he may not have to spend a lot of time and money on registering a local organization, preparing a set of documents in accordance with local requirements and complying with other formalities.

Despite the use of such an agreement, we recommend registering a trademark in the country where the sale of the franchise is planned. This will allow you to obtain monopoly rights to your brand and ensure the legal security of your partners’ business in another country.

Company registration in the selected country

This model will require more time and costs, since by choosing this path, it is necessary to register both intellectual property objects and a new legal entity. And also satisfy the requirements of local legislation — This is the most difficult point, since each region has its own conditions. Let's give some examples.

1. To operate in the United States, all franchised intellectual property must be registered prior to the initial sale of the franchise. Legal protection is provided not only to trademarks, but also to production secrets (know-how).
2. In France, the franchisor is required to disclose information about the franchise before signing the main agreement or making any payments under the agreement. Provide information about the reasons for termination of contracts with former counterparties and confirm the two-year period for conducting a profitable business by the copyright holder.
3. In China, you must have at least two subsidiaries or affiliated companies (shareholder participation is allowed), as well as at least one year of experience in running a franchise business (the “two plus one” requirement).

Creating a master franchise for the region

Master franchise — This is a form of cooperation in which the copyright holder gives the right to enter into agreements to open new outlets under its brand in other countries to partners called “master franchisees.” Such a partner forms his own management company, which is vested with all powers in relation to the final franchisees.

The advantage of this model for scaling abroad is that the partner knows the regional mentality and has prompt access to local resources (suppliers and contractors) that are needed to fully support the franchisee’s activities.

When there is a general plan to develop a business in a new country, it is important to analyze the risks of such a decision.

Prepare for difficulties

In the current conditions, the risks for entrepreneurs from Russia have become more significant and not always obvious. Here are some of them:

The attractiveness of franchises from Russia. There are still no restrictions on opening and running a Russian franchise business outside the Russian Federation. However, the introduced state and private sanctions affect the investment attractiveness of Russian companies.

Sanction restrictions. This applies more to payment systems. Due to sanctions, many Russian banks were disconnected from SWIFT, which limited the possibility of transfers in foreign currency. And some payment systems have banned Russian residents from using their services. This problem can be solved by opening a foreign account, which is also not easy if you have a Russian passport.

The influence of politics on business. Many foreign systems and services refuse to cooperate with representatives of Russian business even without officially introduced bans from the authorities — for personal or ideological reasons. Also, some companies independently introduced restrictions as a safety net to avoid potential violations of the law. It is possible to find ways to solve this problem, but this again involves additional costs and time.

To take the franchise outside of Russia or not

The development of Russian franchises on the international market is possible, but it is better to hold off on large-scale expansion. Reasons: foreign policy crisis and a shaken attitude towards business from Russia. However, if the company has nowhere to grow in the Russian Federation and there are resources to enter other markets, then you can consider some friendly countries, for example, the CIS. But even in this case, it is worth gradually testing the markets and making a few transactions at the start. This will help test the viability of the project in a particular country and assess the impact of existing restrictions on growth opportunities.