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What is the appropriate structure for international expansion?
What are the advantages and disadvantages of using the following structures for a United States-based retail clothing business when selling products to other countries (Canada being the first point of entry): wholly owned retail outlets, joint ventures, franchises, or distributor arrangements. Please address legal, tax, regulatory and broader strategic ramifications.
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Start with broad, Canada is really no different to another US state when it comes to doing business; each state has different laws and so does Canada. In fact, each province in Canada has different laws.
Now, if you're moving further afield, you have to start to entertain the JV, franchise or distribution agreements. The biggest decision here is also strategic: Do you want the OS stores to be under your company name or do you want to just sell your clothing through other retailers?
I'll assume you want your own names. Personally, I prefer using franchises because I like the flexibility it brings and the capital that comes with each new store owner.
With franchising, you can also incorporate a JV into some of the bigger foreign language countries. Remember this: The way countries like England, Ireland, Australia, New Zealand do business is similar to doing business in the states and should be franchised directly.
When it comes to tax and regulations, franchises generally allow you to make sales directly from your home base in the states and you'll only have to think about withholding tax in the other jurisdictions.
All the Best
Brad Sugars
Brad Sugars is the founder of ActionCOACH, a business coaching franchise. As a world-renowned entrepreneur, author and business coach, he has helped more than a million clients around the world find business and personal success. Sugars has owned and operated more than two dozen companies including his main company, ActionCOACH, which has nearly 1,000 offices in 22 countries.
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