International Due Diligence in Cross-Border Franchise Transactions

To comply with religious customs or restrictions, for example, hotels in Israel need to modify some services on the Sabbath, such as the operation of swimming pools and health clubs. [...]a franchisor may need to inquire during its business due diligence whether locally prescribed business hours are more restricted than those in the franchisor's home jurisdiction or whether religious holidays or practices could impact the proposed operations of the franchised business. [...]the franchisor must also inquire whether the franchisor's trademark must be registered before it is licensed to a third party to avoid violating local law in the target market. In high risk countries, regions, or areas, and in certain businesses that are at a high risk of bribery, it is paramount that franchisors retain a professional investigator not only to check the background of the potential local partner, but also to conduct background checks on any local agents or consultants hired to represent the franchisor locally, instead of relying on a questionnaire completed by prospective agents. Because the U.K. Bribery Act creates a strict liability corporate offense for failure to prevent bribery (as opposed to vicarious liability), subject to being able to establish that a company has "adequate procedures," a franchisor must also ensure compliance by any "associated persons," which includes anyone who performs services for or on behalf of the commercial organization. [...]as part of the franchisor's due diligence, it should investigate whether the proposed local partner has any policies and/or procedures in place that could guard against a violation of the Act or other similar legislation.