Franchisees have been able to use franchising as a way for their restaurants to diversify internationally. McDonald’s operates its over 36,000 locations in more than 100 countries through franchising. Franchising allows the franchisor to license for a fee their systems, trademarks and other intellectual assets. However, it is important to be proactive in avoiding disputes and disagreements. McDonald’s was involved in a dispute over one of its Indian Franchisees. Connaught Plaza Restaurants owned nearly 170 restaurants by 2017. Connaught’s dispute with McDonald’s illustrates the challenges that global franchising might pose for the parent firm (Venezlale (2018) Disputation is made worse by distance between franchisees, franchisors, and lack of knowledge in the new market. It is more challenging for the franchisor in foreign countries to oversee commercial transactions. American fast food restaurants are now known for their internal branding. Subway and other corporations have many shops overseas than they do in the United States. Over 80% of top 200 American restaurants do business internationally, and at least 74% are from abroad.
The firm’s ability to enter the international market will have a significant impact on its viability, as it can gain a larger market share and generate higher revenues. The Federal Trade Commission governs franchise store agreements in America. International retailers are not regulated by the FTC. This creates legal problems in compliance enforcement and can make it hard at times to manage foreign franchisees (Venezlale (2018)). Corporate ties could also put international franchising businesses at risk. It is possible for significant problems to arise, which could lead to a termination that is not ideal. It is important to do your research in order to establish lasting partnerships. Franchising organizations should be flexible and able to use arbitration or court processes in the United States if there are problems. The international franchisors need to be able to analyze and respect the foreign courts’ and arbitrator tribunals’ treatment of foreigners.