Franchising in other Markets | Franchise Law

By Martin Mendelsohn

If you are considering expanding your franchise system into other markets, then there are aspects of the law that you should consider before embarking on the process.

A franchisor venturing into a foreign country who expects to meet franchisee prospects must understand how contracts can be entered also there since it may differ from what he finds familiar. No-one would like unintentionally to become contractually bound.

The other major areas to be looked at will be

• Competition law which is largely uniform throughout the European Union but not completely uniform. These laws can affect in and post-term restrictions on competition and the treatment of exclusive and non exclusive territories as well as the use of the internet for advertising and sales.
• Industrial and intellectual property laws which are the creation of each individual state and which are critical to each and every franchise. These laws cover such areas as Trade Marks, Copyright, design rights know-how and confidential information.

International tax planning should also feature in the calculations. The effect of withhold tax on cash-flow. If relief against what has been deducted cannot be set off against the domestic tax bill can render what might have otherwise been profitable not such an exciting prospect.

The existence of special industry laws which may impact a business need to be understood and allowed for.

There may be special franchise focussed laws; they exist at the time of writing (April 2007) in 29 countries - the laws change and new laws are added from time to time. Failure to comply can result in significant problems and costs.

There are still countries which have taxes on imports as well as bans on certain industries. There also exist countries in which a local national must own 51% of a local business.

In addition to the legal issues outlined, there is always a general body of law which affects all business which may differ from domestic laws to an extent which may affect the way business and relationships are conducted.