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Top tips for investing in a franchise from overseas

Top tips for investing in a franchise from overseas

While meticulous research is crucial before buying into an international brand, there can be significant advantages of introducing it to a UK audience

Who’s coming to the UK? Many international franchise brands want to get into the UK market and use it to establish a foothold in Europe.

Overseas franchises give UK investors a wider range of business opportunities to choose from - and it can be exciting to bring a foreign brand to a UK audience.

The UK has long welcomed overseas franchise brands. Most people know that McDonald’s and KFC started out in the US, but there are lots more that started off overseas.

The Just Cuts hair salon franchise started in Australia, gym franchise Snap Fitness hails originally from Minnesota and kitchen and interiors franchise Schmidt originates from France.

Franchises looking for UK franchisees or master franchisees now include Slim Chickens (founded in Arkansas), Zocalo, a Mexican food franchise from Sweden, and Coffee Planet, a United Arab Emirates coffee shop chain.

For more, check the lists of exhibitors in upcoming international franchise exhibitions.

They include blinkee.city, an electric vehicle franchise from Poland, and Swiss pretzel franchise Brezelkonig.

Investing in a franchise from overseas can involve cultural, legal and language issues.

American English, for instance, includes terms that are confusing or even incomprehensible to UK English speakers, especially in the food sector.

Most Brits know that in the US ‘biscuits’ are not sweet treats, but breads commonly served with gravy, but franchises that don’t adjust for issues like this risk alienating customers.

So what do you check for when looking at International Franchises?

“You need to do a lot more due diligence when checking out a foreign franchise,” says Paul Mitchell, group chief executive of Accentia Franchise Consultants, who has helped many overseas franchises launch here and is currently working with Zocalo, which is looking for a UK master franchisee.

Meet the franchisor

Paul recommends: “Go and see the franchise head office in person if possible. If not, meet them online. “Before the pandemic, I would not have suggested this, but now we have seen hundreds of franchise transactions done this way. This makes overseas franchisors more accessible and research easier.”

Niri Patel, UK master franchisee for the Dutch fitness studio franchise fit20, visited the franchisor in the Netherlands several times and took his wife and two teenaged children so they could give their feedback on the concept.

Niri says: “I wanted to get to know the franchisor team well and they freely shared stories about times when there had been difficulties because I knew that could happen to me at some stage and I wanted to see how they supported franchisees.”

It helps to meet the team in less formal circumstances, such as over meals, he says, adding: “You pick up things in casual conversation that you wouldn’t capture in a business meeting.” Dan Archer, Visiting Angels’ UK master franchisee, went to the USA to meet the founders.

He says: “I was keen to check that it was still a family-run franchise and to talk to them about their future plans.

“A family franchise can be very different from one run by a corporate entity, where future plans can depend on the shareholders.”

How has the franchise been adapted for the UK market?

Dan says: “I was attracted by the franchisor’s values and their focus on carer recruitment and retention.

“I analysed the brand and its place in the UK market and, aided by British Franchise Association registered advisers, worked out what steps would make it work in the UK.”

Many modifications were needed.

“Unlike the UK, the US does not have a single regulatory body for care, so we had to write and implement all the policies and procedures to make the franchise operations comply with the Care Quality Commission,” he says. Instead of ‘translating’ the US operations manuals, Dan rewrote them and all the marketing material from scratch to suit the UK market.

“It was about more than just switching the language,” he says.

The franchise agreement was also rewritten to suit the UK legal position and the trademark registered in the UK to ensure Dan’s UK rights to the brand.

Look for a pilot scheme

“Prospective franchisees should check that the overseas franchise has been properly piloted in the UK to prove the concept works here,” Dan says. “Ensure the pilot has not been rushed through in order to bring the brand to the UK market.” In his case, his franchise was the pilot for the Visiting Angels brand.

Are the concept and brand already known in the UK?

Some concepts, such as fast food outlets, work worldwide, but others may not.

A home care franchise may not work in cultures where extended families normally look after elderly relatives themselves. Existing brand recognition will make a UK launch easier.

Get advice

Investing in an overseas franchise is a little more of a learning curve than investing in a UK-based franchise, so speak to others who have done it and consult franchise advisers before taking the plunge.

Duncan Attwood, fit20

“I knew we’d have to work hard on brand awareness”

“When I first visited the UK headquarters of the fit20 fitness franchise, I had no idea that it started in the Netherlands,” jokes Duncan Attwood.

“When I found out, it didn’t put me off - if anything, I was more excited by the idea.”

Duncan, a former gym general manager, was looking to start a business for himself and, based on a friend’s recommendation, went to meet Niri Patel, the UK master franchisee for fit20. Now he’s the fit20 franchisee in Exeter.

“When I first heard about fit20, I was sceptical of their claim that 20 minutes a week in a fit20 studio could keep people fit, but when I discovered that fit20 already had 130 studios in the Netherlands I was comforted,” Duncan says.

He was convinced about the concept, but as he would be UK franchisee number three he was concerned about whether the brand and model were well known enough to work in the UK.

“I knew we’d have to work hard on brand awareness, but was convinced that once people got to know the brand they would come flocking,” Duncan says.

“People in the UK have the same wants and needs as those in the Netherlands, so I thought the model should work.”

However, Duncan was aware that people in the UK, having not heard of fit20’s 20-minutes-a-week fitness model, would be doubtful.

“I knew that it would require different marketing in the UK, where people are used to the idea that fitness requires 30 minutes three times a week, so I don’t use the 20 minutes once a week marketing message here,” he says.

“Instead, I first tell people about the benefits of the workouts and explain how it’s done. Then when they’re excited by the model, I explain that it only takes 20 minutes a week and they’re keen to get started.”

Niri had all the franchise documentation translated from Dutch to English.

“I consulted a solicitor skilled in business contracts, who said that it only needed a few tweaks that were about the translation of terms from Dutch to English, so that banished my worries about that,” Duncan says.

He’s now marketing his studio locally, mainly via networking, and is considering opening a second.

Andrew Lofts, Visiting Angels

“I could see that the model would work here”

Andrew Lofts has been the East Staffordshire franchisee for care company Visiting Angels since September 2020.

A former transformation consultant to a mix of global organisations and small and medium-sized enterprises, he says: “The fact Visiting Angels was originally a US franchise did not bother me because I could see that it had a UK master franchisee who had conducted a successful pilot franchise here.

“Seeing that it had been properly piloted was very useful because Visiting Angels has a carer centric model of operation, unlike many other care franchises.

“Observing that it had been successfully run in the UK for three years meant I could see that the model would work here and that we could deliver the same quality of care.”

Were there cultural differences to overcome?

“No, because Dan Archer, the master franchisee, had taken the original model, analysed it and produced an Anglo-Saxon version of the US model,” Andrew says.

“I’d advise prospective franchisees looking at investing in an overseas franchise in the UK to check that the essence of the business they’re considering can be delivered successfully within their local culture.”

It helped that Visiting Angels had become a recognisable brand in the UK before Andrew invested in his franchise.

“If an overseas franchise changes nothing when it comes to the UK, there can be a clash of cultures,” he says.

“For instance, here in the UK we don’t talk like North Americans, so I don’t refer to older people as ‘seniors’ because I don’t think it translates naturally to the UK.”

He advises prospective franchisees considering an overseas origin franchise: “Think about what story you’re going to tell with that brand and model in the UK.”

Legal and regulatory aspects

The laws and regulations that apply to franchises differ according to country, so when an overseas franchise decides to launch in the UK this is one of the first things that the franchisor - and any prospective franchisees - must consider.

John Pratt, senior partner at Hamilton Pratt, which has the largest team of specialist franchise lawyers in Europe, says: “The regulations around franchising differ considerably between countries.

“The UK, for instance, has no franchise-specific laws, though the British Franchise Association has a code of ethics to which members commit.”

A raft of other statutes impact on franchising, however.

In the US, franchising is covered by federal law that requires all franchisors to produce a franchise disclosure document, drawn up by lawyers, which franchisors must provide to prospective franchisees. But it’s complicated by the fact the legal situation varies among individual states.

Australia, while not having a franchise law, has a franchising code of conduct, though that was amended by the government in July 2021. The many significant changes include the requirement for franchisors to provide prospective franchisees with a key facts sheet before they invest.

There’s no overarching franchise law that applies across the whole EU - individual nations have their own regulations.

So what does this mean for a prospective franchisee? It depends on the way the franchisor operates when recruiting UK franchisees.

“Sometimes overseas franchisors want to franchise direct, in which case the franchise agreement will be between you, the franchisee, and them,” John says.

“In these cases, the franchise agreement may be drawn up under the law and regulations that apply in the franchisor’s country.

“This means it’s even more important than usual to get the agreement checked by a franchise lawyer who understands the relevant law. This can be expensive for the franchisee, but it should be checked.”

Alternatively, an overseas franchisor may initially appoint a master franchisee for England or the UK.

In that case, the franchisee will be signing an agreement with the master franchisor and usually, that agreement will be drawn up according to English law (or Scottish law where relevant).

This is easier, says John, but he points out that even an agreement that has been translated into English and adapted to suit UK regulations may not be fully watertight legally.

“What is better is an agreement that has been drawn up according to English law, custom and practice,” John explains. “I would expect this to have been arranged by the master franchisee in order to offer it to prospective franchisees.”

Overall, the message for prospective franchisees who are considering an overseas franchise is:

• Ask to see the contract before making any decision about whether to go ahead; and

• Have it checked by a franchise lawyer familiar with overseas contracts, who will be able to explain the implications.

The author

Linda Whitney writes about franchising for the Daily Mail, What Franchise and many other publications.

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