Alternatives To Master Franchising: Area Development Agreements, Area Representatives And Joint Ventures


Originally published in the International Journal of Franchising Law (Volume 10 – Issue 4 – 2012).

This article provides a comprehensive analysis of international franchising structures – direct franchising, exclusive master licenses, área development agreements, área representatives, joint ventures and hybrid arrangements – and discusses their characteristics, advantages and disadvantages. The authors discuss the various factors to consider in evaluating these stuctures and discuss the relevant practical, cultural and legal considerations in cross-border expansion. The legal issues include sanctions laws, anti-bribery laws, dispute resolution, intellectual property, recordation and the nature of the franchisors’ relationship with their franchisees depending on the chosen structure.

Overview Of International Franchising Structures -

1. Direct franchising -

Under this method of expansion, a franchisor will franchise directly with a franchisee. The initial question is whether any particular country being considered for expansion has adopted and/or implemented franchise regulations. Over the last decade or so, many countries have adopted some form of franchise regulations. Some of this is as a result of the popularity and growth of franchising internationally. Many large U.S. based franchise chains, particularly in the Quick Service Restaurant (“QSR”) arena have franchises around the world. It is not unusual to find a McDonald’s in Helsinki, Finland and KFC outlets all throughout China.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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