As franchising continues to be a preferred growth strategy for scalable brands, many U.S.-based businesses are looking beyond domestic markets and toward international expansion. Whether it’s entering Africa’s fast-growing consumer economy, tapping into Southeast Asia’s digital retail boom, or establishing a presence in Europe or the Middle East, international franchising offers significant opportunity—but also comes with added legal complexity.
At The Jones Firm, we help franchisors and investors structure cross-border franchise deals that are compliant, strategic, and built for long-term growth. Here are the top legal considerations U.S. brands should keep in mind when going global.
1. Local Franchise Laws Vary Widely
While the U.S. operates under the FTC Franchise Rule and individual state requirements, each country has its own franchise laws—and some don’t recognize the franchise model at all. For example:
- China requires a franchisor to have at least two company-owned units operating for one year before offering a franchise.
- France mandates a disclosure document (similar to the U.S. FDD) under its “Loi Doubin” law.
- Gulf countries often require a local sponsor or commercial agent for foreign companies entering the market.
Key Tip: Always consult local counsel or collaborate with an international firm (like ours) with local legal partners.
2. IP Protection Must Be Secured Upfront
Your trademarks and brand assets may be protected in the U.S., but you must register your trademarks locally in each country where your franchisees will operate. Without this, your brand is vulnerable to infringement—or worse, bad-faith registration by others.
Real-World Scenario:
A U.S. restaurant franchisor expanded into West Africa but failed to register its mark. A local competitor registered a similar name and caused consumer confusion, requiring costly litigation and brand rebuilding.
3. Franchise Structure: Direct, Master, or Area Development?
Franchisors typically choose one of three models when going international:
- Direct franchising: The U.S. brand contracts directly with foreign franchisees
- Master franchising: A local master franchisee operates and sub-franchises within the region
- Area development: One franchisee opens multiple units within a territory under a development schedule
Legal Tip: Master franchise agreements often require added diligence, territorial protection clauses, and local adaptation terms.
4. Currency, Tax & Payment Considerations
Franchise fees and royalties need to be addressed with respect to:
- Currency controls
- Foreign tax obligations
- Double taxation treaties
- Cross-border payment enforcement
Franchise agreements should include clear language on currency conversion, withholding taxes, and bank transfer procedures.
5. Localization Requirements
International franchisees often need to adapt business operations to align with local tastes, cultural norms, and regulations. This might affect:
- Menu or product offerings
- Marketing content
- Data privacy (e.g., GDPR in Europe)
- Employment and labor practices
Ensure your franchise agreement clearly outlines what changes are permitted and who bears responsibility for compliance.
6. Dispute Resolution & Governing Law
Cross-border disputes can become complicated without proper planning. Your international franchise agreement should specify:
- Governing law (often New York or Delaware for U.S. brands)
- Dispute resolution forum (arbitration vs. litigation)
- Enforceability under local law
Tip: Many global franchises use international arbitration bodies (e.g., ICC, LCIA) for more neutral proceedings.
7. Due Diligence on Local Partners
Your international success is only as strong as your on-the-ground operator. Conduct thorough background checks, site evaluations, and financial reviews of any potential master franchisee or area developer. A bad partnership can derail a promising market.
8. Compliance with U.S. Export and Anti-Corruption Laws
Even while expanding abroad, U.S.-based franchisors must remain compliant with:
- FCPA (Foreign Corrupt Practices Act)
- OFAC sanctions lists
- Export control laws
Violations can carry serious penalties, especially when doing business in emerging markets.
Conclusion
International franchising can unlock enormous growth potential for U.S. brands—but only with the right legal strategy and local understanding. From trademark registration and deal structuring to compliance, negotiation, and enforcement, The Jones Firm helps clients expand globally with confidence.
Thinking about taking your franchise model overseas? Contact us for a consultation on international franchise structuring and compliance.
