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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Are you looking to establish a franchise system in the German market?

Are you in need of some basic information and an appropriate assessment? Make use of the practice-based consultancy services of the German Franchise Institute, a 100 percent-owned subsidiary of the German Franchise Association. You can choose between two options and levels of detail.

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THE GERMAN FRANCHISE MARKET IN OVERVIEW

About the survey

The 2017 franchise statistics were collated between 7 February and 4 March 2018. The Deutscher Franchiseverband e-mailed 248 members and 724 non-members. Net participation was 187 franchise systems, with a return rate of 19.3%. Prof. Achim Hecker, Digital Business University of Applied Sciences (under incorporation) was asked to conduct and analyse the survey.

Deutscher Franchiseverband statistics show positive trend

Performance by the franchise industry in Germany was dynamic in 2017, as demonstrated by the Deutscher Franchiseverband’s analysis of statistics. Across Germany, some 970 franchise systems have 124,000 franchisees, up 3.6% on the previous year. In total, 162,000 franchise businesses (+1.9%) employ 707,000 people, an increase of 1.3%. The trend of growth in franchisees, businesses and employees of recent years therefore continues unabated. The trend in turnover is particularly telling: with 112.2 billion euros the German franchise industry recorded a significant rise of 8% compared to 2016.

As the body representing the interests of professional franchising, Deutscher Franchiseverband takes seriously its duty to provide substantive German franchise industry figures, data and facts. To obtain these, we look closely at last year and survey members and non-member franchise systems about individual and general trends. The results produce a pleasing picture for the German franchise industry as a whole: the growth trend of recent years has clearly continued. There have been record rates for new franchisee integration and system implementation.

Equally dynamic - turnover and franchisee trends

In 2017, the systems surveyed experienced perceptible partner growth - rounded up across the franchise industry as a whole, more than 4,400 new franchisees accounted for growth of 3.6%, which far exceeded last year’s growth of 1.8%. It is therefore hardly surprising that turnover was also dynamic, as more franchisees mean a greater number of businesses, which generate considerably more turnover. The result is a disproportionate rise over the past year. “Franchise industry performance has been extremely pleasing and is in line with the trend in the German economy as a whole”, is the assessment by Torben Leif Brodersen, Deutscher Franchiseverband’s Managing Director, of the latest figures. “The positive figures are also testament to much increased customer brand awareness, both online and offline. A fact from which the franchise industry is apparently benefitting”, according to Brodersen.

Sector reshuffle? Catering pushes retailing down to third place

There has been a reshuffle in franchising sectors for the first time in years. In the survey, catering (27%) now takes second place after the service sector, with 40%, pushing retail back to third place, with 23%. Handicrafts is by far the smallest franchising sector, with 10%. Next year’s statistics will show whether this is a long-term reshuffle.

The sectors may portray themselves as individual, but the systems surveyed have their development phase status in common. More than half of the systems surveyed (53%) stated that they are currently expanding, 16% are mature and 14% in the development phase. These figures speak for the franchise systems’ desire to expand, which also shows in their expectations for the current year: the systems surveyed are planning to acquire an average of 10 new franchisees in 2018.

Focus on alternative target groups

The franchise systems are increasingly appealing to new target groups in order to grow their concept successfully. If, in the past, employees, professionals and managers were in first place (24%), they have now been overtaken by existing entrepreneurs (25%). They are followed by existing franchisees (18%), own employees (10%) and university graduates (7%). Franchise practice is therefore focussing more on the subject of multi-unit franchising. “The German franchise industry is repositioning its expansion strategies. What was already apparent last year from the franchise barometer, our annual member survey, is now being confirmed by figures from the latest, reliable data”, is how Torben Leif Brodersen summarises the results. “It is also clear that if you want to satisfy your appetite for expansion, you should look at new and unconventional approaches to choosing target groups. The fact that this willingness is clear is testament to the German franchise industry’s agility and ability to innovate.” The same applies to the survey responses regarding alternative forms of expansion - 42% of systems surveyed deem multi-unit franchising to be important or even very important and more than half of them feel it is at least quite important. This is a future concept that has already reached everyday franchise practice.

Franchise industry drives jobs

In 2017 the franchise industry created 10,000 new jobs. This is an increase of 1.3%. A total of 707,000 people in the Federal Republic of Germany are employed full time, part time, or casually in franchise businesses. When extrapolated to full and part-time work, the trend is even more striking, with a rise of 2.3%. “Franchise systems’ success is based on a highly specialised cooperation. We encourage franchise systems to work on their employer brand and actively assist their franchisees with employee search and selection because brands not only make their mark through ambassadors for the system, but also through employees”, argues Torben Leif Brodersen. “If you enthuse good people about working for the system, you have already found tomorrow’s franchisee.”