Expansion into Germany – entry into the German market

Franchising is an internationally successful business model. A multitude of companies are already running franchise networks in a variety of different national markets and by doing so, have been able to successfully position their brands. Nevertheless, there is still a great deal of potential available when it comes to expanding franchise networks into Germany.

The Federal Republic of Germany is home to the strongest and most stable economy in Europe. While many nations in the world experienced times of economic insecurity and the European Monetary Union suffered a crisis in the last decade in particular, Germany was able to prove the sustainability of its economic system. On top of this, Germany also demonstrated that it is a particularly ideal location for franchise systems in all sectors.

The German Franchise Association has set itself the target of supporting franchise systems from outside of Germany in entering into the German market and accompanying them in all stages of this process. The “International Committee” has been created within the Association to focus on this objective. The German Franchise Association itself boasts a tightly-knit international network.

We therefore invite you to come and discover and conquer the German market for your franchise system and to make the most of the outstanding conditions available in our country.

Are you planning to expand into Germany and need local consulting support? The Franchise Association will be happy to answer your initial questions. In addition, the Association has associated experts – consultants and lawyers – who provide specific support. An overview can be found here:

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THE GERMAN FRANCHISE MARKET IN OVERVIEW

The Deutscher Franchiseverband represents the interests of the German franchise industry in the area of economic policy – on both a national and an international level. It was founded in 1978 and is based in Berlin. The Franchiseverband is the quality community and represents franchisors and franchisees alike. The association currently has more than 400 members. In 2020, there were approx. 930 franchisors operating in Germany. Together with more than 138,000 franchisees and more than 749,000 employees, they achieved total revenue of around EUR 135 billion.

Stable and resilient in the face of crisis in the year of Covid

In the second year of the crisis, the current franchise statistics indicate that the franchising economy is developing in a stable manner. According to them, the approx. 920 franchise systems across the country contained 141,821 fran-chise partners, 2.2% more than the year before. In total, around 787,207 em-ployees work at these 180,984 (+ 2.7%) franchise operations. These numbers suggest that the foundations of the economy are stable. And the total reve-nues for franchises across Germany also indicate this: they have improved in the second year of the crisis, with a slight uptick to 135.8 billion euros.

The sectoral spread: Services remain in first place

The service sector retains its position at the top, with 44%. Remaining in second place is gastronomy and leisure, with 30%. Trade places below them at 19%. Craft, with 7%, remains fourth. This ranking shows that the service sector has continued to develop its top position. In addition, the movement of previous years that brought these sectors to their current positions seems to have stabilised.

Franchise climate index (FKI) shows: the mood is slightly clouded compared to last year.

Twice a year, the FKI assesses the economic climate within member systems. While this collapsed at the start of the pandemic in the first half of 2020 to 122%, summer 2021 brought the barometer back up to a positive 145%. With coronavirus once again rearing its head at the end of 2021, this value dropped only a little to 142%, thus remaining almost at its pre-crisis level. The slight weakening of the positive mood is confirmed by a comparison of both franchisors and partners. If the franchis-ing systems surveyed were expressly positive before the coronavirus crisis (mood is outstanding: 23%, mood is good: 58%), these values remain suppressed atFranchise climate index (FKI) shows: the mood is slightly clouded compared to last year. Twice a year, the FKI assesses the economic climate within member systems. While this collapsed at the start of the pandemic in the first half of 2020 to 122%, summer 2021 brought the barometer back up to a positive 145%. With coro-navirus once again rearing its head at the end of 2021, this value dropped only a little to 142%, thus remaining almost at its pre-crisis level. The slight weakening of the positive mood is confirmed by a comparison of both franchisors and partners. If the franchising systems surveyed were expressly positive before the coronavirus crisis (mood is outstanding: 23%, mood is good: 58%), these values remain sup-pressed at present, with 17% (outstanding) and 42% (good); nevertheless, they still reflect optimism even in the present situation. 30% were more of a neutral opinion, with 9% and 2% assessing the atmosphere as bad or very bad respectively. The franchise partners’ estimation dropped off somewhat more precipitously. If, before the crisis, 84% of them were at outstanding/good, 4% at bad/very bad and 12% neutral – an unusually positive result – this slipped downwards in the second year of coronavirus. Currently, 50% of the franchisees indicated an outstanding/good mood. By contrast, 25% of them indicated bad/very bad. 25% of them were neutral. “Natu-rally, the mood in some parts of the franchise systems has clouded. After two years of pandemic-related losses, this is not surprising. But with the Franchise Climate Index, with its differentiated survey focuses, giving such a constant picture, we can clearly detect stability and resilience in robust system structures. Good conditions indeed for weathering a crisis with determination,” Torben Leif Brodersen, Chief Ex-ecutive of the German Franchise Association, suggests.

Positive partner development even in a crisis

The partner development numbers have also risen in the past year, but show less dynamism when compared with preceding years. While the number of franchisees was at 138,000 in 2020, it rose in 2021 by 2.2% to 141,821. Multiplied up to reflect the entire franchising economy, this means around 3,000 more partnerships were concluded than in 2020. “The current statistics once again confirm the situation we are told about in personal exchanges. The franchising economy is to the greatest extent stable, with the bulk of it coming through the crisis well, and even making good some of the losses. Sadly, we do also see systems that have had to put up a tough fight. Here, as the Association, we give intensive support,” reports Kai Enders, President of the German Franchise Association. “The idea behind these systems and networks has won out even in turbulent economic times and contributed to the franchise economy not coming to a standstill internally. Rather the opposite. There are clear signs of further development and growth – the speed and dynamism slight-ly dampened when compared with previous years, but still at a clear, positive level,” Enders continues.