The way a franchisor contractually structures new market entry should be tailored to markets laws and regulations and reflect any local party they may have to launch in that market. Granting master franchise rights to a local party already in the market is a common approach, but there are many options for the legal and contractual approach to this growth phase in the franchisor's business.
Before committing to the contractual 'how to,' consumer markets lawyer, Katrina Hammon, shares answers to some common questions raised by successful New Zealand franchisors looking to make the leap and expand globally.

Q. What comes first, legal advice or finding a local party that will agree to key terms in a non-binding memorandum of understanding, or heads of terms?

A. Naturally I'd say, pick up the phone and tap into my experience advising AUNZ franchisors, who, over the last 20+ years, have successfully established a footprint in over 34 markets across the globe. Adopting a simple approach to high-level market due diligence will save you both time and money. The majority of developed markets outside of New Zealand will have franchise specific laws or intellectual property laws that extend to control franchising, licensing and the use of brands. There are markets that require a franchisor to first have trademarks applied for, or registered, prior to market entry, or deem any agreements signed (even non-binding heads of terms) as illegal or unenforceable until the franchisor has registered with the relevant regulatory authority in that market.

Q. Is Australia the easiest market for a New Zealand franchisor to start its global expansion strategy?

A. For proximity and ease of traveling to the market, yes. But in all other respects, Australia should be carefully considered and treated the same as any other market. A well-informed and strategic process evaluating the relevant market is required. Don't be fooled by the ease of "crossing the ditch" from a travel proximity perspective. Australia is heavily regulated and there are important differences, not just in terms of the laws, but also cultural nuances. In my experience, failing to respect these cultural differences when interacting with franchisees and customers is often the beginning of growing pains in a new market.

Q. I've got my trademarks registered in New Zealand, will that protect my brand in other markets globally?

A. The short answer is no. Trademarks must be registered in the relevant market. Ahead of global expansion, franchisors should evaluate which markets they consider a higher priority and apply for registration of trademarks. New Zealand trademarks can be used as the basis for those registrations. Our team can assist with a global brand registration and protection strategy before you start the expansion journey.

Q. Our franchised business concept has proven to be successful in New Zealand for us as franchisor and our franchisees, but can we rely on that and provide financial modelling based on New Zealand for other markets?

A. As is the case in New Zealand, where a franchisor provides financial modelling or projections, care must be taken to ensure that it is an accurate and fair reflection of the actual performance experienced. For example, providing historic data or projections based on the highest performing franchisee would be an issue. Important notes (aka disclaimers) must highlight any key information that is relevant or irrelevant to the specific market. For example, we know that labour and taxation costs are higher in certain markets as compared with New Zealand. In my experience, the majority of claims against franchisors stem from the recruitment or sales process and, specifically, the information and representations made during the recruitment of a local market master franchisee and franchisees. We can assist with the review of recruitment collateral and the process adopted to onboard franchisees to reduce the risk of a successful claim.

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