Budgeting Lessons for Getting It Right in Overseas Locations, Part 2

This is part 2 of an excerpt on budgeting for international expansion, taken from the book Franchise Management for Dummies. Part 1 -- which covered the costs of adaptation, operations, development, and real estate costs -- can be found here.

Recruiting, onboarding, and training costs. You should prepare a budget to cover your capture costs (identifying, recruiting, and closing prospective franchisees). Your budget should include conducting comprehensive background checks and due diligence on each candidate, as well as any brokerage fees you expect to pay.

Your international expansion team will require good interpersonal skills that are adaptable to multicultural audiences. Be careful not to pack non-recruiting tasks onto your recruiting staff. They have the important task of recruiting the right international franchisees. Don't burden them with also having to scout for real estate and other tasks when traveling abroad to meet quality candidates.

There will also be an initial cost for onboarding and training your international franchisees. Even though they are a distance from you, they still need to be onboarded, trained, and provided with initial support, just like your domestic franchisees. Depending on your international franchise structure, that onboarding may require you to provide direct support. With the availability of advanced digital communication tools, including webinars, video or cloud-based training, and other related online support, it would be wise to consider using these tools to reduce your costs while maintaining your brand standards. Again, make certain well in advance that your staff is able to obtain the necessary visas to work in the franchisee's market.

Legal and regulatory costs. As mentioned, an international franchise deal is a complex agreement with numerous moving parts you must account for as you develop a budget for legal and regulatory compliance. Also, account for the ongoing legal fees you will incur while enforcing your system standards and franchisor rights. Although you will be relying on your domestic franchise lawyer for most of your advice, you should expect to also engage lawyers in the targeted countries. (A future article will deal with hiring an attorney overseas.)

Sophisticated international franchise lawyers understand international franchise deals and have a network of lawyers across the globe they have worked with before. Rely on their expertise in this area when seeking the proper international legal advice. Your domestic franchise attorneys will coordinate your international legal matters with any local attorneys in the markets you're targeting.

Supply chain. There are always a number of sourcing and supply chain kinks to work out before internationalizing your brand. Beyond the additional expenses and legal issues, there are practical issues of timing. Depending on how you plan your supply chain structure, getting the goods into another country on time and on a regular basis sufficient to meet local demand comes with challenges. You will need to budget for the associated costs.

Conclusion

Overall, you should do a line-by-line analysis of your accounting for your domestic operations and identify what those (and any additional) costs will be for your international expansion plans. Having a well-structured approach will go a long way to getting this important area right. It is one of the reasons we recommend that you engage the services of a recognized franchise consultant to help you work through all the issues and not simply go to a brokerage interested in making a sale.

 Joyce Mazero, a shareholder with Polsinelli PC, a law firm with more than 825 attorneys in 21 offices, is co-chair of its Global Franchise and Supply Network practice. Contact her at 214-661-5521 or jmazero@polsinelli.com. Michael Seid is managing director at MSA Worldwide. Contact him at 860-523-4257 or mseid@msaworldwide.com.