Over the past 20 years or so, the world has witnessed both the incredible growth of global brands as well as an increase in the sophistication of franchise structures adopted to pursue expansion. Many would comment that with the advent of global brands, gone are the days of the mom-and-pop operation.

In a similar vein, the trend in international franchise expansion appears to be moving away from single-unit franchise development and towards multiple-unit development, usually in the form of master franchising, area-development agreements and area-representative arrangements.

Many U.S. franchisors would not today even consider expansion into a new country or market unless they were able to leverage the abilities, local market knowledge and sophistication of larger candidates.

Of course, each master franchising area-development arrangement is different in its own way, but for the sake of this article the common feature is that each permits a franchisor to appoint a local party to assume some or all of the usual responsibilities of a franchisor in the local market together with a plan to open a multiple number of units.

With the increased use of multiple-unit growth strategies comes a corresponding increase in the sophistication of master franchisee candidates. What will first attract any potential candidate is the uniqueness and quality of the underlying business that is being franchised. If the business does not “wow” the candidate as a matter of first impression, then it is unlikely the candidate will look past that first casual glance.

Deeper than that, most candidates are looking for that combination of factors that provides a product or service that is either entirely new to that market or is being delivered in an entirely unique way, or in connection with an inspiring brand.

Related to that is whether the master-franchisee candidate can understand the system and believe it can be translated to the local market. Some markets are, of course, very similar to the United States in terms of language, culture and even the retail marketplace. Others are not similar but still inviting of American brands and concepts.

Every new market will be different in some way, and it is easier if both the franchisor and master-franchisee candidate recognize that possibility and address it early on in their considerations and business planning.

They will try to identify what makes the business successful in the home market and whether that similarly applies in the target market. Done right, this often requires extensive market research to determine if the business system, product or service will have a similar or different reception in target markets.

Every franchise involves, at the most fundamental level, the license of a system of knowledge or know-how, together with the use of a brand, including a trademark. The master-franchisee candidate will need to consider how well known the brand and trademark are in the target market at the time the opportunity is being considered, as well as the growth potential.

The growth of the brand’s recognition will surely be affected by the work to be performed by the master franchisee in the local market. But in addition, the master franchisee will be looking at the franchisor’s current and future commitment to grow the brand outside the franchisor’s home market.

If international expansion by the franchisor is an established long-term strategy, the master-franchisee candidate will have one reaction. If this intended international expansion is a first for the franchisor and an experiment, a different reaction should be expected. It all speaks to the franchisor’s level of commitment outside the home market.

Most sophisticated master-franchisee candidates should be making an assessment of both the franchisor and the franchisor’s senior management team. In particular, do they have a commitment to and a track record in international expansion through multi-unit development?

On a technical level, the master franchisee will want to know and see that the franchisor’s key intellectual property, usually one or more trademarks, can be protected in the new market by way of registration. Trademarks are, of course, protected generally on a country-by-county basis.

An important brand-related issue is the marketing of the system and advertising of products and services. Many local candidates will look to the franchisor on some level for assistance with their marketing and advertising.

At one end of the spectrum, some franchisors take responsibility for a global advertising strategy. At the other end, the master franchisee is responsible for preparation of all materials to be used in the market and for devising on its own the strategy and rollout of an advertising program. Most franchisors provide something in between.

Some franchise systems are built around the delivery of a product or service that involves the use of unique and proprietary products, services and equipment. A master-franchisee candidate should investigate whether anything of a proprietary nature is part of the system, and then if it can be made readily obtained in the new market.

In certain instances, for example, the importation of certain types of ingredients is regulated or even prohibited. Both the franchisor and master franchisee should not assume that any such items can freely cross borders, even in this era of ever-growing free trade.

A franchise is the license of a brand and a system, which involves the use of know-how and certain methodologies in operating a business. The sophisticated master-franchisee is usually expected to pay significant upfront and ongoing fees for multiple unit rights.

In return, the candidate is often looking to only acquire rights to, and to invest substantial sums in, a system that is sufficiently established and documented. This increases the likelihood of success and usually means that the master franchisee needs to do less to establish the system in the new market.

Very often, a franchise system needs to be customized to the needs of the local market, such as the changes to food recipes brought about to suit local tastes. The master franchisee will want to see how receptive the franchisor is to understanding and accepting the need for permitting changes.

Of course, none of the first four areas covered will matter unless the master franchisee sees and believes that there is a financial model to the venture that works. Every multiple-unit franchisee candidate should investigate thoroughly the expected costs in establishing and operation the business, the infrastructure that will be required in the new market (including corporate units), expected sales, costs and margins, the potential and expected return on investment, and an exit strategy.

A franchisor that is used to offering single-unit franchises in its home market may also be new to the analysis where a multiple-unit growth model is to be adopted. In a true master franchise arrangement, for instance, there will be a sharing of sub-franchisee generated fees and royalties, and this can be the subject of significant negotiation based on the obligations that the franchisor and master franchisee will assume in the relationship.

Almost every multiple-unit agreement is different, and very often this is based on the market potential for the largest market. Both sides will need a common vision of the market potential

In addition, they will, of course, need to come to terms on a form of agreement. The legal terms, and in particular those of a business nature, will have a significant impact on the master franchisee’s analysis. For instance, length of term, ability to renew, the proposed development schedule and the application of local franchise laws are all issues that are important.