National vs. International sales

Many reseller systems that are successful in the U.S. can also be successful in other countries. But there are special legal issues involved in international reselling. These issues come up often:

  • Hiring and dealing with local legal counsel in the relevant country.

  • Modifying standard U.S.A. agreements for use in foreign countries.

  • Understanding the different legal and business environments involved in international reselling.

  • Conducting due diligence investigations of potential foreign business partners.

  • Merging with or buying foreign reseller systems.

Necessary Steps

Typically, the initial decision to expand internationally comes as the result of a qualified third party expressing genuine interest in taking a concept into a foreign country. Before entering into an agreement with this third party, there are many issues to be considered and tasks to be performed.

  • The seller needs to protect his intellectual property in the foreign country. U.S.A. trademark registration is not much help beyond U.S.A. borders. A seller should explore international trademark registration as soon as possible in the process.

  • The seller needs to conduct a due diligence investigation of the international business partner in order to comply with the U.S.A. Patriot Act.

  • The seller needs to select the structure of the business relationship with the third party. The most common relationship in international reselling is the master seller arrangement, where the third party acts as a sub-seller in the country. But there are other types of possible arrangements such as direct reselling, international subsidiaries and international joint ventures, each of which has its own advantages and disadvantages. Local law in the relevant country and the applicable international tax treaties should be considered.

  • The seller needs to select and hire competent local legal counsel in the relevant country. This lawyer will help guide through the process of complying with all of the applicable legal requirements for doing business in the relevant country.

  • The seller needs to modify the existing U.S.A. seller documents for use in the foreign country. This may include translating your documents into a foreign language and preparing a seller offering circular in a different format than the standard UFOC format. The seller may also need to register the seller with certain foreign governmental offices (and some countries require governmental approval of each seller agreement).

  • The seller needs to consider how the Resellers will be trained, monitored and supported in other countries.

  • In a master seller arrangement, the U.S. seller gives the foreign master seller the right to use the marks and the system in connection with reselling in a particular territory for a certain period of time.

  • In that territory, the master seller will act as the seller.

  • It will typically be responsible for developing leads for qualified Reseller prospects for signing the seller agreements, training new Resellers, collecting fees from Resellers in the territory, and monitoring Reseller compliance with system standards.

  • The master seller usually pays a portion of its revenues to the seller as royalties. They may be required to open company-owned units and/or to develop a certain number of sellerd units according to an agreed-upon development schedule.

Master seller Agreements

Like reselling in general, the master seller relationship allows for significant expansion without significant expenses or significant risks. The master seller arrangement has many additional advantages, including the following:

  • The master seller or its owners are typically natives of the foreign country and are very familiar with the language and culture of that country.

  • The master seller may also have helpful business experience, business contacts and government contacts in the relevant country.

  • The master seller in the country can provide training and support to Resellers easier than the U.S. seller.

  • The burden of translating all seller materials can be shifted to the master seller.

  • The burden of complying with the applicable foreign laws can be shifted to the master seller.

Risks

International sellers face a number of special risks which should be taken into account. Successful international reselling must anticipate a wide variety of possible stumbling blocks. These risks should be considered carefully before beginning any international reselling project.

1. Cultural

  • The sellerd concept may not "translate" well in another country.

  • The goodwill associated with the seller in the U.S. may be non-existent in another country.

  • Consumers may be biased against foreign brands for certain products and services.

2. Financial

  • The seller’s net revenues from international reselling are often less than domestic net revenues due to increased expenses and sharing of revenues with the master seller.

  • Revenues from international reselling will be affected by international tax treaties.

  • Revenues will also be affected by fluctuations in currency exchange rates.

3. Business

  • International reselling may require more management resources than the seller can spare.

  • Supporting and supplying Resellers is more difficult and expensive.

  • In master reselling, the seller has even less control over operations by Resellers than under domestic reselling.

  • Successful international reselling often depends on having good local business. partners. Bad master Sellers can be disastrous.

  • Capitalism is a new concept in some countries.

  • Local competition may be well-established.

4. Legal

  • It will probably be more difficult to enforce a seller agreement against a Reseller in a foreign country.

  • Some countries have laws that are very protective of Resellers .

  • The laws governing business relationships may be undeveloped in some countries.

5. Political

  • Political instability and governmental corruption are serious problems in some countries. Any international seller agreement should take these possibilities into account, and you should do appropriate research before entering a new territory.

  • Established seller sales may be hard to follow in foreign languages. In addition, the political and cultural climate may not adapt to the sellerd products.

Expanding Into the United States

The U.S. represents a huge market with nearly 300 million people, most of whom have a very high standard of living compared to many countries. A reseller system that is not doing business in the U.S. is missing out on this important market. But there are special legal and business issues involved in reselling in the U.S.

I can work with you or your existing legal counsel in your country to help make your U.S. expansion go as smoothly as possible by.

  • adapting foreign reseller systems to the U.S. market.

  • preparing international master seller agreements.

  • adapting form seller agreements (and other agreements) to be used with U.S. Resellers to comply with U.S laws and business customs.

  • drafting seller offering circulars and exhibits.

  • preparing and filing the registration forms required by various state agencies.

  • complying with other U.S federal and state laws and regulations affecting seller sales or seller relationships.

  • establishing U.S. legal entities.

  • acquiring U.S.-based reseller systems.

 

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