Finding local counsel in international markets: retaining experienced and competent foreign counsel will ensure a much smoother transition and thorough understanding of the complexities of international franchising.

Depending upon the particular franchisor, the franchisor's business, the nature of the transaction, and the country or countries involved, the following criteria should be considered:

* knowledge of the local country's franchise laws and regulations,

* experience in international franchise transactions,

* experience in relevant local laws affecting franchising,

* ability to communicate in the franchisor's principal language,

* experience in international dispute resolution,

* experience and contacts with local government agencies and officials regulating franchising,

* experience and contacts with local government agencies and officials regulating other areas involved in the franchise system,

* familiarity with the franchisor's business or industry,

* availability of compatible office technology to interact with the franchisor and its domestic advisors,

* compatible fee policies,

* ability to address key legal and business issues involved in the international franchise program including enforceability of standard franchise document provisions in the local country,

* familiarity with laws affecting the availability and enforcement of monetary judgments, choice of law, forum, jurisdiction, and enforcement of foreign judgments, arbitral awards or equitable remedies including non-competition and de-identification covenants,

* ability to advise on foreign exchange regulations and local banking practices,

* experience in dealing with applicable import/export and immigration laws,

* experience with the application of local anti-trust laws to the franchise offering, and

* in countries where legal regulation is divided between federal and state, provincial or district laws, the availability of different offices and professionally qualified local counsel to advise on a unified transparent national basis.

As stated at the outset, domestic franchising requires legal advice on compliance with franchise specific laws and many business, regulatory, tax and other commercial laws. International franchising requires similar compliance and local legal advice. Retaining experienced and competent foreign counsel to advise in these areas will add a cost component to the offering, but in the end will ensure a much smoother transition and thorough understanding of the complexities of international franchising, assist in avoiding surprises and disputes at a later date, and go a long way toward developing a successful international franchise expansion program.

RELATED ARTICLE: Tips for preparing to retain local international counsel.

By Karen Satterlee

Start early. It is never too early to engage local counsel. Local counsel should be engaged during the exploratory, due diligence phase and certainly well before you select a franchise candidate and engage in drafting regulatory documents, franchise agreements or letters of intent.

Think collaboratively. One single attorney may not meet all of your business needs. Consider whether you need individual attorneys with expertise in trademark, franchise, tax, commercial and contract law, respectively. This is not an area in which to try and cut costs. You will likely pay for those savings later.

Who is in charge? The necessity of collaborating with outside and local counsel means that someone (i.e., in-house counsel) needs to be in charge of the project and the costs associated with it. If there isn't an in-house attorney, it is incumbent upon outside counsel to establish the parameters of authority with the franchisor.

Put it in writing. Before engaging outside or local counsel, put your expectations and requirements concerning the engagement in writing. Be clear about how billing, staffing and requests for conflicts waivers will be handled. Ensure that local counsel understands that all work performed on behalf of the franchisor must be pre-approved. These guidelines should be acknowledged and agreed to in writing at the outset of the engagement.

Then again, do you want it in writing? While U.S.-based attorneys might be in tune with cost-related issues when working for corporations, the custom in individual countries may be different. What may seem like a brief, straightforward question to you may necessitate the drafting of a treatise from your local counsel's perspective, with the attendant cost attached. If you are not explicit in the manner, method and scope of the research and communication vehicle you are requesting, you may be unpleasantly surprised by the results.

Budgeting. Have both your local and outside counsel create a budget on a task-by-task basis so that there are no surprises to the franchisor's management team when the costs of international expansion come rolling in. Fees that exceed the budget should be approved in advance.

Reimbursable expenses. Set forth exactly what the franchisor considers to be reimbursable expenses. Most major corporations will not pay for internal messengers courier services, accounting or bookkeeping services, computerized research charges, secretarial services, overtime or word processing. While many companies will pay actual photocopying, long-distance phone and facsimile charges, they usually will not pay for mark ups to them. It is also critical to have a very clear policy on billing for travel time, given that such travel time may be extensive in international markets. If there is a policy relating to expensing travel costs (such as requiring counsel to fly coach or capping the dollar limit on meals), this should be stated clearly in your guidelines for outside counsel. Note that while these are relatively common positions for U.S. corporations to take, the practice in foreign markets may vary widely. Communication is the key to ensuring that there are no misunderstandings with counsel mid-deal.

Media relations. Finally, ensure at the onset of the relationship that local counsel understands that all media inquiries about the franchisor, prospective franchisee or the deal itself, are referred to the franchisor itself for handling.

Karen Boring Satterlee, CFE, is director, franchise licensing for Starbucks Coffee Co. and Seattle's Best Coffee, LLC and is a member of the Licensed Store Leadership Team. Satterlee can be reached at ksatterl@seattlesbest.com.

Frank Zaid is a senior partner in the Toronto office of the Canadian law firm, Osler, Hoskin & Harcourt LLP. He can be reached at fzaid@osler.com.