1. Market

The selection of management is based on what conditions the franchise system intends to enter the market. The factors that need to be considered include the economic type of the host country, the inflation rate and interest rate of the host country, the financing difficulty of local partners, the possible role of financial institutions such as banks in franchise negotiations and franchising, whether there are other local technical know-how and well-known trademarks that make the franchise system lose its uniqueness, and the attitude of local authorities is also very important.

In international franchising activities, franchisees may have to rely on local partners to conduct market research and analyze the local market and the development potential of franchising in this market.

2. Culture

Some cultural factors should also be considered when evaluating the methods adopted. If the host country has no enterprise tradition, it should ensure that foreign enterprises have more control over the operation of local partners, so as to ensure that local operators are adequately trained and effectively perform their functions.

Cultural factors may be important when deciding to enter a particular national market. Whether a particular product or service, a particular trademark or trade name and a particular mode of operation can be accepted by a country often depends on local traditions, religious customs and legal system.

3. Legal environment

The legal environment of the host country is very important when deciding the specific operation mode. In order to play its role, franchising must have basic laws such as commercial contract, sound company law, joint venture law and intellectual property law, and the rights conferred by these laws can be effectively exercised.

Although some laws and regulations are the premise of the effective operation of franchising, there are other legal factors that determine whether franchising is appropriate. Including registration requirements, approval of agreements by competent government authorities, restrictive foreign exchange control regulations, import and export quotas and tax laws, including agreements to avoid double taxation.

(2) Subjective factors

1. Operational properties

The most important factor to determine the best operation mode is the nature of the operation itself, which must be analyzed in detail.

Many factors need to be evaluated when deciding whether franchising is the most suitable way for a particular enterprise. Most importantly, relevant business models should be tested. In other words, it must be proved to be successful by practice. Financial issues are also important? The return on capital of operating a franchise store must be sufficient for the franchisee to obtain a reasonable return on investment, earn a reasonable profit, and enable it to pay a reasonable use fee for the services provided by the franchisee. The franchisee's income from franchising must also be sufficient to compensate its management fees and enable it to obtain reasonable profits.

2. Economic factors affecting mode selection

The nature of regional general franchise is that most of the investment is made by sub-franchisees, regional developers or franchisees in the host country. However, this does not mean that the franchisor does not need to invest a lot of money. Training must be provided, the operating institutions providing services for sub-franchisees and franchisees must be in place, enough employees must be employed to provide support services for local and foreign sub-franchisees or franchisees, and the fees required for the registration of intellectual property rights or industrial property rights must be paid. Therefore, as the actual founder and developer of the network, franchisers and sub-franchisers or developers must have very strong financial resources. Obviously, every commercial technology needs a certain cost. Therefore, it is necessary to evaluate which technology is the most effective from the economic point of view.

3. The experience of the parties concerned

In many ways, the experience of the parties is important. If we first consider it from the perspective of the parent company, we may find that there is a significant difference between operating a series of wholly-owned stores and joining the network through regional general franchise. If the franchisor has no experience in franchising, it may be preferable to do it step by step and conduct a trial operation before international franchising. International franchising through regional general franchising is also different from regional development agreements or direct individual franchising. If a franchisee has no experience in regional general franchising, it is best to gain experience in this field in his own country, and then try to apply regional general franchising abroad.

Whether you have franchising experience is not important to the sub-franchisor. However, it is very important for sub-franchisers or developers to have commercial experience in regional general franchising or regional development franchising, because the operation of commercial networks, especially such a huge network as regional general franchising or regional development, requires ability and professional knowledge.

Any contract is a natural reflection of the bargaining power of the parties, so what one party can get from the other will depend on the bargaining power of the parties and the advantages that can be used in the negotiation to a considerable extent. These advantages may also be personal, such as the knowledge and experience of the sub-franchisor in negotiating and performing international transaction contracts and solving legal and economic disputes.

4. Sharing responsibilities and benefits

Due to different business forms, the responsibilities and interests of the parties to the agreement will be different. As far as franchising itself is concerned, this division will also be different due to franchising methods. The nature of regional general franchise determines that the responsibility of the sub-franchisor is relatively heavy: the person responsible for network development, providing training and assistance to the sub-franchisor, supervising and protecting the intellectual property rights and industrial property rights of the franchisee is the sub-franchisor. In the case of direct single franchise, the franchisee's responsibility is lighter: it is not responsible for the network, nor for protecting the franchisee's intellectual property rights and industrial property rights. It is very likely that the franchisor just asked him to report possible infringement. Similarly, the responsibility of the agent is different from that of the distributor, and the responsibility of the distributor is different from that of the licensee.

Different responsibilities will also be reflected in the interests of all parties. The greater the responsibility of one party, the more benefits it may gain. In the regional general franchise, the sub-franchisor must get enough income to get a certain profit while fulfilling his obligations. Franchisors must also earn enough income to support their unique role in this relationship. The decision on franchise mode will also reflect the changes in the responsibilities and income distribution of all parties.

control

In some cases, an important determinant of determining the most appropriate way is the degree of control of foreign partners over local partners. This control is greater in franchising than in licensing or distribution. In addition, in franchising, the degree of control varies with the form of franchising. The more franchisees directly participate, the stricter the control. In the regional general franchise, although some control rights are still reserved, the franchisor's control rights are the smallest, and in this case, the franchisor participates the least. What is acceptable control for the other party depends on several factors, including subjective factors such as personality. For example, those who have independent personality and take independent actions to do better may not accept strict control. In this respect, we should also adjust the balance of interests between the two sides.

6. Risk factors

Risk is an inherent part of all business. To evaluate the transaction risk, we should try our best to evaluate the uncertainty. One of the reasons why franchising is popular is that its failure rate is much lower than other more traditional business forms. The uncertainty of this industry is very low. However, it should be emphasized that this is different from the emerging franchise system, and it is a mature franchise system that has been tested and proved by practice. Therefore, we should pay attention to this when choosing franchising, especially in the case of international franchising. What is discussed below is a mature franchise system.

In franchising, the franchisor's risk is reduced to the extent that the franchisor does not need to use his own, but uses the franchisee's capital to develop the system. The risk of franchisees is also reduced, because their business philosophy is proved and accepted by consumers. Usually, the risk-taking between the franchisor and the sub-franchisor who is most qualified to assess the risk of the host country is stipulated in the contract or agreement.

Most risk factors involved in franchising are not unique. However, some risks are particularly relevant to this form of business. Franchising has adopted a proven and successful method, which really reduces the risk, but it must follow the rigid requirements of the franchisor's business plan, which may prevent the sub-franchisor from making necessary reforms to make the franchise system successful in a specific country. In addition, due to environmental changes, it is necessary to modify the franchise system, which will be postponed excessively due to its rigid requirements. Special clauses in the franchise agreement, such as those that can grant exclusive rights, should also be included in the risk factors. Although they can provide certain guarantees at the beginning of the franchise relationship (for example, the franchisor independently supplies products), later, for example, in terms of product supply, they may prevent the sub-franchisor from adopting more convenient methods than those provided by the franchisor.

(1) Risk factors to be considered by franchisees.

In order to reduce the uncertainty, the franchisor needs to consider all the factors that constitute the risk. In the case of international franchising, these risk factors can be divided into two categories: external risk factors and internal risk factors.

① External risk factors

Examples of external factors include the expected slow economic growth, the possibility of trade embargo and the fact that the quantity or quality of necessary raw materials is insufficient. Most external factors are beyond the franchisor's control, but the risks brought by these factors can be reduced by collecting more detailed and reliable information.

② Internal risk factors

Internal factors include the organizational system, available funds and human resources of the franchisor's domestic operation. For example, if no institution in the franchisor's system has the ability to master the necessary management, training and control in the regional general special agreement and adapt its system to the needs of the host country, then the franchisor needs to spend additional funds to establish such an institution. If these factors are not considered, the risk is that international operation will seriously consume the franchisor's capital and human resources, thus damaging the franchisor's domestic operation and ultimately endangering international operation.

(2) Risk factors that the sub-franchisor should consider.

To some extent, the risk factors that the franchisor must evaluate are the mirror images of the factors that the franchisor needs to consider. Therefore, people who consider the political climate of the host country are not only franchisees, but also sub-franchisees. In addition, the sub-franchisor should also consider the possibility of paying compensation to the franchisor because the development plan is not completed. If there is a trade ban prohibiting the import of raw materials needed for franchising, the sub-franchisor will either have to turn to other sources of supply, or the products or services provided by the network will not meet the quality or even quantity requirements of the franchisor. In the latter case, the sub-franchisor may not only be sued by the franchisor for failing to comply with the agreement, but also be sued by the sub-franchisor for failing to provide high-quality goods and services to customers.