Background
A well-established European language school wishes to set up its first business in two to three Southeast Asian countries, and it has chosen the franchising model as a mechanism to accomplish this.
Action Taken
The school obtains advice from its lawyers in Europe, who draft a long, detailed franchise agreement for this purpose. The agreement identifies Thailand as a priority market, and goes on to brand Malaysia and Vietnam as secondary targets, if the Thailand franchising operation does well. The business registers its trade mark in Thailand only. It performs due diligence on its Thai partners and is satisfied with the result.
Outcome
The Thai business partner requests that the school is opened first and that a trial period be used to measure the viability of full franchising. Therefore, no written agreement is signed before the school in Thailand is opened. The school is successful by the end of its first year and at that point, the Thai partner stops paying the informal license fees to the European school. Six months later, the European language school discovers that the Thai partner has opened a business in Vietnam using the same name and curriculum.
Lessons Learned
- Remember to register your IP in markets that you believe you will have business dealings with in the foreseeable future.
- Always insist on a written agreement from the start. It will make things much clearer and will enable you to control the geographical area in which your partner operates/will operate.
- Local legal advice is more important than home country legal advice.