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

Even in the crisis year of 2020, current franchise statistics indicate a positive development of the franchise economy. According to these statistics, approximately 930 franchise systems nationwide had a total of 138,748 franchise partners in the past year, an increase of 4% from the previous year. Overall, the 176,240 (+2.6%) franchise operations employed approximately 749,198 employees, corresponding to an increase of 4.5%. These figures attest to growth and ongoing development even in 2020, a year dominated by the Covid pandemic. This is reinforced by the development of total revenues: At 135 billion euros, this figure increased again by 4.6% compared to the previous year.

Stable partner development continues

The surveyed franchise systems were able to increase partner development once again. While the number of franchisees was 133,000 in 2019, this group grew by 4% in the past year to over 138,000. Extrapolated to the entire franchise economy, this means that about 5,300 more partnerships were established under an existing umbrella brand than in 2019. And all this occurred under the considerably more difficult conditions of the coronavirus pandemic. The survey also investigated which target groups were generally sought out to successfully multiply business ideas: At 30%, salaried skilled workers and executives retained the top slot, followed by independent entrepreneurs (24%), existing franchisees (17%) and internal employees (9%).

Service sector once again leads among industries

The service sector remains in the lead among industries with 38% of all franchises. In second place, a change occurred: Here, the restaurant and leisure sector (30%) overtook trade (21%). The craft sector remained in fourth place, now with 11%. The ranking of sectors in 2020 confirmed the unchallenged leader. Movement was only experienced in the other rankings. Whether this sector data is sustainable will become clear in surveys for future years.

Figures reflect resilience and resistance to crisis

Overall, the figures for 2020 demonstrated a resilience to external influences. This is also indicated by the recovery of the Franchise Climate Index (FCI), which is established biannually and which represents the general climate within the member systems. While the FCI showed a positive 145% at the end of 2019, it fell considerably in the 1st semester of 2020, which was marked by lockdowns, to 122%. The figure for the 2nd semester of 138% reflects a significant improvement in the climate among franchise systems.Perception of negative consequences of Covid continues to decrease: While 56% of the systems organised in the franchise association felt negative impacts of the Covid pandemic in the survey for the 1st semester, this figure has now fallen to 37%. On the other hand, 35% experience the consequences as positive. 28% stated that they had barely felt any changes.

Stable mood among franchisors and partners

While the climate in the surveyed franchise systems was markedly positive before the coronavirus pandemic (excellent climate: 31%, good climate: 48%), these figures are currently more subdued with 31% (excellent) and 33% (good), but still reflect an astonishingly positive climate given the current situation. 18% indicated that the climate was very poor or poor. An additional 18% considered the climate to be neutral. The franchise partners view the situation more critically.  While surveys were very positive before the crisis, with 71% describing the climate as excellent/good, 12% reporting a very poor/poor climate and 18% indicating neutral, these figures declined slightly during the Covid pandemic. Currently, 51% of franchisees reported an excellent/good climate. On the other hand, 15% indicated that conditions were very poor/poor. 24% of partners said that the climate was neutral. Crisis resistance confirmed: When questioned about the ability of the franchise concept to weather crises, 96% of the respondents assessed franchising as a particularly crisis-proof business model. This is 9 percent more than in the past summer.