CLIVE C HOULSTON CHAIRMAN and MANAGING DIRECTOR MR.ELECTRIC UK AIRE SERV UK

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CLIVE C HOULSTONCHAIRMANandMANAGING
DIRECTORMR.ELECTRIC UKAIRE SERV UK
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HOW TO ENTER THE EU MARKET ?
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EUROPEAN EXPANSION

• It is through franchising that some of the
  worlds largest and best-known brands have
  achieved international expansion

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EUROPEAN UNION

• Common language - NO
• Legal requirements the same - NO
• Common culture - NO
• Economic factors the same NO

ITS A MINEFIELD
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UNDERSTANDING THE DIFFERENCE IS THE KEY
FOOTBALL ?????
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PRODUCT / SERVICE EVALUATION

• Before considering entry into any other member
  country of the EU it is essential that proper
  needs-based analysis has been undertaken of the
  market

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DIFFERENT COUNTRIES

• Never assume that all countries are the same
• Every market must be treated individually
• You have to be flexible and understand that
  market

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WHAT ARE THE MOST EFFECTIVE MEANS OF ENTERING THE
EU MARKET ?
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EXPANSION ROUTES

• There are four main international franchise
  expansion routes-
• DIRECT FRANCHISING this involves the grant of
  franchise rights by a Franchisor directly to a
  Franchisee in another country
• all Management Service Fees paid to Franchisor
• the Franchisor carries all costs associated with
  translation, support, legal compliance, training

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EXPANSION ROUTES

• There are four main international franchise
  expansion routes
• A NATIONAL MASTER FRANCHISEE typically acquires
  the rights to an entire country with a view to
  establishing a pilot operation and then
  sub-franchising to single/multi-unit franchises

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EXPANSION ROUTES

• There are four main international franchise
  expansion routes
• Alternatively, a Franchisor may choose to appoint
  a number of REGIONAL MASTER FRANCHISEES either by
  sub-dividing a country or in countries where the
  economics dont fit a Master
• As with a Master, the Regional will sub-franchise

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EXPANSION ROUTES

• There are four main international franchise
  expansion routes
• As a fourth option, a Franchisor may choose to
  appoint a number of AREA DEVELOPERS
• As with a Master and Regional the agent may have
  the right to issue a limited number of sub-
  franchise units

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DIRECT FRANCHISING

• This is NOT a common route to market
• Franchisor must consider how to generate multiple
  enquiries in the territory under consideration
• Franchisor has to manage brand image and quality
• Local legal requirements mean that franchise
  agreements will be different

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MASTER FRANCHISEE

• This is the most common route to market
• It involves the Franchisor granting franchise
  rights for the whole or a part of that country
• Quickest way to establish the business in the
  country using someone elses funds
• Franchisor has to sacrifice a proportion of both
  the up-front fee and ongoing fees

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REGIONAL MASTER LICENCE

• A fast growing method of international
  franchising
• The Franchisor retains some of the operational
  support and central logistical support
• Regional Master Licensee will generally have a
  shorter term licence than a Master but will not
  have the same infrastructure requirements
• Franchisor takes larger percentage of shared MSF

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AREA DEVELOPERS

• An approach often used in the USA
• The Franchisor retains most of the operational
  support and central logistical support
• Area developer will generally act as the
  representative of the Franchisor
• Franchisor may take back the territory when
  initial development complete

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EXPANSION ROUTES

• Becoming a Master Franchisee involves taking a
  brand and adapting the existing business to suit
  a new market utilising your local knowledge

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DOES YOUR OPERATIONS MANUAL TAKE ACCOUNT OF
UNDERSTANDING?
TRUNK ???
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EUROPEAN EXPANSION

• The franchise business model has enabled
  companies to adapt swiftly to cultural and
  economic differences, capitalising on the local
  knowledge and contacts of their local
  representatives to build the brand in new markets

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TRAINING SUPPORT

• As technology has grown more sophisticated and
  the global market has become smaller, providing
  training and support to Master Franchises around
  the world has become easier

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TRAINING SUPPORT

• A Master Franchisee can expect to work on their
  own initiative, but like single/multi-unit
  franchises they should receive training and
  support as part of the franchise package

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COMPANIES INDIVIDUALS

• It is common for companies as well as individuals
  to become Master Franchisees

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HOW SHOULD YOU ESTABLISH A FEE STRUCTURE?
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SOME CONCEPTS FOR DIRECT FRANCHISING

• POPULATION many franchise concepts base
  territory fees on domestic population
• a more accurate figure would be to relate this
  to spend as a percentage of income
• BUSINESSES sometimes based on average spend on
  a product or service
• more accurately needs to be adjusted to factor
  local cost base

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MASTER FRANCHISING

• POPULATION for service/product franchise
  concepts based on population a review of European
  populations by percentage identifies an immediate
  problem
• Can the population sustain the infrastructure
  costs of replicating the Franchisors business

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MASTER FRANCHISING

• REMEMBER a franchise works because everyone
  wins
• When calculating the fee structure there has to
  be a viable return at all levels in the chain
• You need to balance up-front fees along side
  ongoing revenue stream

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WHAT ARE THE LEGAL REQUIREMENTS FOR ENTERING THE
EU?
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SETTING UP IN A COUNTRY

• Many countries welcome reputable franchise
  concepts and have no real legal restrictions

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SETTING UP IN A COUNTRY

• Many countries welcome reputable franchise
  concepts and have no real legal restrictions
• Some countries however have taken the view that
  local Franchisees should be protected, and
  impose stringent registration or disclosure
  requirements

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AGREEMENTS

• As a rule you should expect that a Master
  Agreement will be subject to negotiation and as
  such legal costs can escalate

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AGREEMENTS

• As a rule you should expect that a Master
  Agreement will be subject to negotiation and as
  such legal costs can escalate
• Generally the Sub-Licence Agreement is non
  negotiable, however it is most probable that you
  will need to have agreements adapted for each
  countrys legal requirements

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AGREEMENTS

• Where a franchise requires a number of employees
  you need to be aware of local employment law
  issues

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TAXATION

• When calculating the viability of any entry into
  another country not only should you take account
  of the set-up costs but the impact of taxation on
  foreign earned income, e.g. withholding tax

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SUMMARY

• BUILDING A BRAND ACROSS MULTIPLE COUNTRIES CAN
  ENHANCE THE CORE BRAND VALUE FOR ALL INVOLVED
• IT CAN CREATE NEW MARKET OPPORTUNITIES FOR
  COMMERCIAL SERVICE BRANDS

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QUESTIONS