Guide to Setting up Your Franchise Abroad

Everyone has seen it: The McDonalds golden arches near Red Square, the Starbucks in Beijing (one of many there). If you want to make money abroad, well, so do the big U.S. franchise brands. It has even come full circle, as U.S. immigration has driven Latin American fast-food into heavily Hispanic big cities.

Alternatively, you could take a shot on running one of the increasingly successful domestic franchises — just add capital, hire a staff and go!

Action Steps
The best contacts and resources to help you get it done

Find a franchisor that wants to be represented abroad

Not all franchisors are ready to set up in foreign lands. Some won't really be able to service your operation correctly or advise on legal or real estate matters.

I recommend: Start with a well-known franchise brand that is already seeking foreign representation. Entrepreneur.com lists 200 of them.

Make sure you are buying exclusivity

Going abroad is high enough risk. You'll want the master franchise, which means the right to a certain geographic area without competitors creeping in.

I recommend: Franchises seeking internationl reps and willing to sign a master franchise are sorted into a database at publication Franchise International.

Figure out the real cost of getting in

It's easy to assume that, because of exchange rates and a probable lack of organized competitors, your franchise will churn cash from day one. If that feeling sets in, watch out!

I recommend: Bison.com has a good checklist of financial questions with a built-in net worth calculator. Once you have that sorted, calculate your expected income in local currency back into dollars using the Oanda historical currency converter. (Hint: Run the numbers for the max, 2,000 days, to see the fluctuations.)

Talk face to face with franchisors

The big kahuna of franchise groups is the International Francise Assocation.

I recommend: Their main site is Franchise.org, but there's another site just for their national franchising event each year, where you can meet face-to-face with companies trying to expand abroad.

Get financing in order

Most banks will want to talk with you if the franchise is well-known. Getting offered the right to buy a franchise from, say, Burger King is in itself a powerful endorsement. But, going overseas changes the equation.

I recommend: You can likely find a global bank familiar enough with your franchisor to back you, but the Overseas Private Investment Corporation (OPIC) makes it their busines to support companies abroad — even small ones.

Tips & Tactics
Helpful advice for making the most of this Guide

• Pickles, onions, hold the lettuce, special orders don't upset us. But be ready to do really, really special things, like dark-meat chicken on pizza or guacamole spread on hamburgers. Localizing the brand might seem backwards, but it usually happens to foreign franchisees, and it's not the end of the world.
• Pick the right neighborhood. If you are going to set up a doughnut shop in South America, for instance, make sure you have at least some built-in customers. Locating next to international office buildings or the U.S. Embassy wouldn't hurt, at least for the first one.
• Split the risk. It can be hard for domestic investors, no matter how cultured or wealthy they might be, to snag a foreign brand name. They bring the cash and the management, you bring the franchise. What could be easier?
• Look at local franchises too. If you want to open a coffee shop, you might do better (and get in cheaper) with a well-known domestic chain name, particularly if you expect to expand beyond the airport and the financial district.