Biting Off More Than They Can Chew: Unfulfilled Development Commitments in International Master Franchising Ventures

Abstract

In the last 25 years, many U.S. food franchisors have ventured into foreign markets, commonly with local partners as master franchisees. Many international master franchising contracts include development commitments that specify a number of outlets that the franchisees must develop in exchange for exclusive rights to an assigned market (often, their entire nation). Based on a sample of 142 ventures of 53 U.S. food franchisors in 37 countries, the inescapable conclusion is that the development commitments in most master franchise agreements are excessively large relative to the number of units actually built by the master franchisee.