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 refers to a business strategy where the franchisor grants licenses to its trademarks, systems and intellectual property for a fee. However, it is important to be proactive in avoiding disputes and disagreements. McDonald’s India Franchisees became involved in an argument. Connaught Plaza Restaurants owned nearly 170 restaurants by 2017. Connaught’s dispute with McDonald’s illustrates the challenges that worldwide franchising might pose for the parent firm (Venezlale (2018) Disputation is made worse by distance between franchisees, franchisor, and lack of knowledge in the new market. Because of this distance it is difficult for the franchisor or to monitor commercial transactions in foreign nations. American fast food restaurants are now known for their internal branding. Subway is one example of a corporation that has more outlets abroad than it does in America. Over 80% of top 200 American restaurants do business internationally, and at least 74% are from abroad.
Global market entry can have significant effects on the viability of a company by allowing it to gain more market share and to generate greater 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)). International franchising companies could be affected by corporate ties. There are many problems that could occur and it is difficult to terminate the relationship. For a lasting partnership to be established, it is vital that you do your homework. If problems arise, franchising companies must adapt and utilize court or arbitral processes within or outside of the United States. International franchisees should not only respect and analyze how courts and arbitrators treat foreigners but also how courts and arbitrators treat them.