Should you expand your franchise into Europe? This is a question facing many US franchisors. While the US is the home place of franchising, Europe too has a well developed franchise community. According to the European Franchise Federation, there are over 10,000 franchise brands operating across Europe. As the continent of Europe is made up of many neighboring countries, there is a wide variety of different cultures, customs, societies, economies and markets. Each country varies in terms of franchise activity, some European markets might not be as developed as others; the United Kingdom (UK), Irish, Spanish, German and French markets lead the way in terms of European franchising.
The United Kingdom and Ireland
The UK franchise market acts as a gateway to Europe for many US franchisors because of a common language and as a result, it is the most active and developed in Europe. According to a NatWest/British Franchise Association survey conducted in 2009, the British franchise industry accounts for £11.4 ($17.1) billion annually (in comparison with £1 ($1.5) billion in 1984). There are 838 franchisors actively operating in the UK, with an estimated 34,600 franchisees.
As neighboring countries with a shared language and some cultural similarities, the Irish and UK markets have become somewhat intertwined. Dr. Stephen Anderson, Commercial Counselor with the US Commercial Service in Dublin, Ireland explains, “until the 1990’s, American companies often went to the United Kingdom as a gateway to Ireland thus the potential of the Irish market remained undeveloped. The reverse is happening today with ambitious Irish companies acquiring the rights for both Ireland and the United Kingdom. The reason why these companies have a better chance of succeeding is that they refine their plans as they establish a franchising network in Ireland, and then are ready to introduce it to the larger U.K. market.” As a result, the UK and Irish economies, while not completely the same, can often be considered side by side.
According to the NatWest/BFA survey, a significant amount of franchise research is conducted online with 43% of potential franchisees consulting the franchise’s website when considering a franchise opportunity. With a significant downturn in the British economy and an increase in the amount of skilled workers becoming unemployed, the quality of potential franchisee leads has improved. Previously the lack of suitable franchisees had been the biggest complaint among franchisors, this slipped to third place in the survey, behind a lack of business due to a downturn in the economy and a lack of financing options.
The US food franchises in particular, transfer well into the UK and Irish markets. With a reasonable amount of shared language and cultural traditions; the resulting major presence of the US in the UK and Irish media makes some US brands already recognizable in these countries. US franchises currently operating in the UK and Irish markets include The Zoo Health Club, Subway, McDonald’s, Orkin Pest Control, Burger King, Mr. Pretzel’s, Juice Zone, AIS Media and Alloy Wheel Repair Specialists among many others. However, entering any foreign market cannot be done successfully without first carrying out a significant amount of research on the economy, market and society.
When considering legal differences, Élise Billy of EXB ,a UK based franchising consultancy says “there is no franchising specific legislation in the UK and no need for registration or formal disclosure documents, which makes franchising easy in some ways for franchisors compared to the US (although there are general contract and competition laws that apply). US franchisors will however need to have their franchise agreements adapted or rewritten to conform to UK laws and also to UK franchising norms if they want to have their agreements accepted by the market.” The UK market has a well developed network of legal professionals specializing in franchising, so finding an experienced legal professional should not be too big a task.
Another UK based franchise consultant, Dugan Aylen of Franchise Recruitment Services Ltd. says “the biggest problem for outside brands looking to invest in the UK is a lack of local knowledge. This can include the correct placement of advertising in order to generate the target number of enquiries at an acceptable cost per lead. One of the most important aspects of franchise recruitment in the UK when being handled by US brands, is to either work closely with an experienced franchise recruitment consultant, who can handle and prequalify the enquiries and deal with them on a day to day basis, or to directly employ a UK based franchise consultant who understands the culture and decision making process of British and Irish Nationals.” A franchise consultant based in the UK is a reliable choice for US franchisors and is likely to increase the likelihood of the brand’s success in its target market.
As its economy exits recession, the UK franchise industry will continue to grow. While the Irish economy has not yet exited its recession, it will hopefully experience some growth as a knock on effect from the increasing optimism in the UK. The UK franchise market remains a first stepping stone for many US franchisors entering the European market, and will most likely remain for years to come.
Franchise Direct UK and Ireland Contact Point:
Brian Rogan (UK & Ireland Sales Director).
Tel.: 00 353 1 865 6370
E-mail: brian@franchisedirect.co.uk
www.franchisedirect.co.uk/
www.franchisedirect.ie/
US Commercial Services Franchise Specialist in the United Kingdom:
Marcella Marcheso
Tel: +44 20 7894 0433
Email: Marcella.Marcheso@trade.gov
www.buyusa.gov/uk/en/
US Commercial Services Franchise Specialist in Ireland:
Finola Cunningham
Tel: +353 1 667 4753
Email: Finola.Cunningham@mail.doc.gov
www.buyusa.gov/ireland/en/
France
France has a well developed franchise industry, with 1,234 franchisors and 49,094 franchisees operating in the country in 2008. It is estimated that there are 37 US franchise brands operating in France, with Century 21 ranking as France’s third most popular franchise, according to Journal de Net. French franchisors are obliged to provide potential franchisees with a Document d’Informations Precontractuelles (DIP) at least twenty days before signing the contract. In consideration of problems faced by US franchisors looking to enter the French market, Patrice Charmont, of Modena Financial advises that US concepts are not always suitable for the French market, and that language can be a huge barrier, as documents provided by the franchisors are very often in English, whereas the DIP and contract must be provided in French. While many US franchisors are more interested in recruiting master franchisors for the French market, financing is not always easy for French master franchisors to secure, and this can be seen in some ways to have hindered the growth of the US franchises within the French franchise industry.
Franchise Directe France Contact Point:
Celia Marrec, Franchise Directe Salesperson
Tel.: 0805 54 04 09
Email: celia.marrec@franchisedirect.com
www.franchisedirecte.fr/
US Commercial Services Franchise Specialist in France:
Rose Marie Faria
Tel: +33 1 43 17 71 49
Email: Rose.Marie.Faria@mail.doc.gov
www.buyusa.gov/france/en/
Germany
Franchising is not very developed in Germany; in fact not many German people are familiar with the concept of a franchise system. However, franchising is growing in Germany, over a ten year period (1998 – 2008); the total number of franchisors in Germany grew from 630 to 950, and now employs 450,000 people in comparison to 250,000 in 1998. The German Franchise Association estimates that US brands represent between 5 and 7 % of the franchises in Germany. There are significant differences in German legislation which US franchisors should consider before entering the German market. Trade industries such as carpentry, carpet layers etc. are subject to strict Crafts and Trade Codes, which limit the potential group of people who could take up a franchise. There are certain requirements which must be met before an individual can run certain businesses such as apprenticeships and master craftsmen diplomas. This can restrict individuals from taking on a franchise opportunity in these industries, who may have to complete a diploma or apprenticeship before being able to start their own business as the franchise’s own training in some cases will not suffice.
Franchise Direkt Contact Point:
Patrick Marschner (Franchise Direkt Salesperson)
Tel.: 0800 6644 678
00 353 1889 7962
Email: patrick@franchisedirekt.com
www.franchisedirekt.com/
US Commercial Services Franchise Specialist in Germany:
Dagmar Winkler-Helmdach
Tel: +49 89 2888 769
Email: Dagmar.Winkler-Helmdach@trade.gov
www.buyusa.gov/germany/de/
Spain
According to the Spanish Franchise Association (AEF) report, there are 919 franchise brands in Spain, of which 18% are from other countries. It is estimated that about 40 of these are US brands such as Burger King, Subway, Haagen Dazs, Midas, Mail Boxes Etc., Re/Max, ServiceMaster, Jani King and Curves. Spanish Law dictates that a franchisor must register any new franchises in the Franchisors Registery within three months of the establishment of this franchise. Outside of this, rules and principles exist within the Spanish Civil and Commercial Codes governing franchise activity. The Spanish economy is developing to embrace an increasing number of franchises each year, and should become a larger contender in international franchising in years to come. For US franchisors presently operating in Mexico with staff competent in handling Spanish leads and enquiries, this market could be a first step into Europe.
Franquicia Directa Spain Contact Point:
Belén Gimeno (Spain Sales Director)
Tel.: 901 667 421
00 353 18 65 63 71 Ext 33
E-mail: belen@franquciadirecta.com
www.franquiciadirecta.com/
US Commercial Services Franchise Specialist in Spain:
Jesus Garcia
Tel: +34 91 3081578
Email: Jesus.Garcia@trade.gov
www.buyusa.gov/spain/es/
A wide range of factors influence the growth and success of a franchise system in any market. It is clear that language and cultural similarities are huge factors in the success of US brands in Europe, not just in terms of target markets, but also in terms of communication with franchisees and/or master franchisors. However, the availability of financing and an active franchise community cannot be ignored as influential factors in the growth and success of a US brand entering a European country. In addition to carrying out a large amount of research about European franchise markets, any US franchisor looking to enter the European market should contact the relevant advisor for their target country in the U.S. Commercial Services, the details of which are listed throughout this article. Franchise Direct also operates a suite of eight multilingual sites covering both US and European franchise markets. Each site hosts a directory of the indigenous franchise industry consultants.
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