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

About the survey

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 350 members. In 2018, there were approx. 993 franchisors operating in Germany. Together with more than 128,000 franchisees and more than 715,000 employees, they achieved total revenue of around EUR 123 billion.

Deutscher Franchiseverband statistics show positive trend

Performance by the franchise industry in Germany was dynamic in 2018, as demonstrated by the Deutscher Franchiseverband’s analysis of statistics. Across Germany, some 993 franchise systems have 128,000 franchisees, up 3.6% on the previous year. In total, 168,000 franchise businesses (+6.5%) employ 715,000 people, an increase of 1.2%. The trend of growth in franchisees, businesses and employees of recent years therefore continues unabated. The trend in turnover is particularly telling: with 122.8 billion euros the German franchise industry recorded a significant rise of 9.4% compared to 2017.

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 2018, the systems surveyed experienced perceptible partner growth - rounded up across the franchise industry as a whole, more than 4,500 new franchisees accounted for growth of 3.6%.

Revenue in the franchise systems also continued to develop in a disproportionately positive way, rising by 9.4% to EUR 122.8 billion. "The figures reflect a very successful 2018 within the franchise industry, which is more dynamic than the German economy as a whole", was the analysis of Torben Leif Brodersen, Senior Managing Director of the Deutscher Franchiseverband, commenting on the current figures.

Service is the industry leader

At 40%, the service sector continues to be the number one sector in franchising. Second place is shared by catering and commerce with 24%. Skilled trades have shown a slight increase – making up 12% of the franchise systems in Germany. Traditional skilled trades companies are also increasingly coming together to form franchise networks by dividing labour. The new sector breakdown shows: there is movement in the middle. While catering overtook commerce in the previous year, they were at the same level in 2018. Whether this split will be sustained in the future remains to be seen in the statistics for the coming years.
As different as the sectors in franchising may be, the systems that were surveyed are uniform in the status of their development phases – 55% (+2%), more than half of the systems in the survey, stated that they were currently in the expansion phase, 14% are at the stage of maturity, and 9% are in the set-up phase. These figures indicate a clear focus on expansion. This is also confirmed by the franchise systems’ planning activities – on average, they were hoping to recruit 12 new franchise partners in 2019.  

Franchise industry less reliant on traditional founders

To successfully multiply the system concept, more and more companies are focusing on new target groups. At 23%, employees and specialist and managerial staff are still in first place, closely followed by a company's own employees at 21% (+ 11%), independent entrepreneurs (20%) and existing franchise holders (18%). This means that the themes of changing sides – from employee to partner, conversion (i.e. the transformation or integration of existing companies into a franchise system) and multi-unit franchising (one partner with several sites) are moving increasingly into the strategic focus of franchise concepts. "The market for the traditional founder is of course still there. It is becoming clear, however, that franchise systems are increasingly relying on new constellations in their partner structures. Employees and both specialist and managerial staff are still at the top of the list as potential franchisees, but there is a noticeable increase in openness to alternative target groups", explains Torben Leif Brodersen, summarising the results. "Those who are looking for growth cannot ignore these alternative forms of expansion. For example, 56% of the systems that took part in the study said that they considered multi-unit franchising to be fairly important, important or even very important. The current figures clearly show that the German franchise industry is prepared to break new ground in this area as well", Brodersen concludes.

Franchise industry an important driver for the jobs market

In the last year, the franchise industry has created more than 8,500 new jobs. This represents an increase of 1.2%. This means that, in the Federal Republic of Germany, a total of 715,362 people are employed in franchise companies, either full-time, part-time or in mini-jobs. "A familiar brand is the foundation of the system's success. Yet this factor is not only relevant for end customers and consumers, but increasingly for employees too – and that includes both existing and potential employees. Another good reason for actively supporting our members in the setting up and expansion of their successful employer brand", Torben Leif Brodersen tells us. "Those who win over employees today may have already won over the partners of tomorrow."