FRANCHISING OPPORTUNITIES ACROSS EUROPE
Mitchel Auerbach, Senior Commercial Officer U.S. Commercial Service, Dublin, Ireland
Dillon Banerjee, Senior Commercial OfficerU.S. Commercial Service, Lisbon, Portugal
Trade Winds ForumMay 16, 2007
OVERVIEW
• Franchising Today • International Franchising• Why Go International? Why Europe?• Franchising Across Europe• Legal Aspects of Franchising
OVERVIEW
• Market Entry Strategy• Our TOP TIPS• East Versus West• The Challenges• The Opportunities• Best Prospects
OVERVIEW
• Our Services • Export Success Stories – Ireland & Portugal• Franchising Shows & Trade Missions • Useful Websites & Contacts
Franchising Today:U.S. Facts and Figures
• $1.53 Trillion Dollars
• Across 75 Industries
• One in Seven Jobs
• 50% Retail Sales
Exponential Growth
• Growing Six Times Faster than U.S. Economy
• 900 New Concepts in last 3 years
• Strongest Growth Sub-Sectors – automotive, construction, child-related, fitness, pet care, senior home care and business service franchises.
• Future Growth Areas – Health & Beauty, Lifestyle and Entertainment franchise offerings.
Franchising in the U.S. 1997 to 2007
1977 2007Sales Revenue% Retail SalesNetwork UnitsNumber Employed
$250 billion30%450,0004 million
$1.53 trillion50%767,00018 million
International Franchising
• U.S. Franchisors lead on International Expansion• 20% of all American franchisors “go global”• Half of all units established are outside the U.S.• Additional 100 Expand Across Borders Every Year
7-ElevenSubwayUPS/Mail Boxes Etc.InterContinental Hotels
25,000 6,000 1,300 700
Why Go International?
• Fast & Efficient Growth Expansion Strategy
• International Demand for Products and Services
• Enhance Reputation & Credibility In Domestic Market
• Become a Multicultural Organization
• Contribute to Economic Development in Foreign Countries
Why Europe?
• Market Size – 728m Consumers!
• Growing Demand for High Quality Products and Services
• Mix of Mature & Developing Markets
• Demographics & Diversity of Cultures
• Development of Retail Infrastructure
• Availability of Local Finance
European Franchising Marketplace
• 7,000 Franchise Systems• With 250,643 Units• 85% of Franchise Concepts are Indigenous • Growth - 33% over last 10 years.
Source: European Franchise Federation Survey 2004
America’s Top Franchises In Europe
Source: www.franchisedirect.com
Ranking Company 1 McDonalds
3 Burger King
8 Remax Int’l Inc
16 Novus
18 Sylvan
25 Pizza Hut
27 ChemDry
31 Century 21
35 KFC
37 UPS Store/Mail Boxes Etc.
38 Subway
41 ERA Real Estate
Development of Franchising By Country
Source: U.S. Commercial Service 2007
1037900 845 781
550 450 400 350 250 200 173 171 17040 20 0
0200400600800
10001200
No. of F
ranc
hise
Sys
tem
s
Franchising Across Europe
Source: EEF - 2004
• Germany and UK lead on number of Domestic Systems followed by France, Italy and the Netherlands
• Lead Exporters of Indigenous Brands – France, Germany, UK
• Lead Importers of Foreign Brands – Denmark, Belgium, Austria
• Highest Growth Markets include – Sweden, Hungary, Spain, Netherlands and Ireland.
• Greatest turnover recorded by Germany and the UK
Impact of American Franchises in Europe
Source: U.S. Commercial Service - 2007
0%10%20%30%40%50%
% b
y U
.S. O
rigin
Legal Aspects of Franchising Country Specific Laws
• France – Statutory Disclosure Requirement
• Italy – Franchise Law 2004
• Lithuania – Statutory Franchise Regulation 2000
• Romania – Law regarding the legal status of a Franchise
• Spain – Specific Disclosure and Registration Legislation
Legal Aspects of Franchising Other Important Considerations
• Check out Country-specific Laws by Industry Sector
• Germany – High Degree of Protection
• Poland – Polish Civil Code
• Greece – Lack of clarity (use of land & buildings)
• Belgium – New Franchise Law under consideration
• Disclosure & Relationship Laws – Albania, Georgia, Moldova and Romania
• Relationship Law – Belarus, Russia and Ukraine
Take a Strategic Approach Where to Go?
• Establish Market Demand• Development of Franchising & supply of Franchise Investors• Economic, Political & Commercial Assessment – GlobalVue• Degree of Cultural Diversity & Language Differences• Ease of Travel• Banking System – Availability of local Finance• Communications & Technology• Competition – Where are your competitors going?• Franchising QuickTake!• How to entry Europe?
Market Entry Strategy
• Master License, Area Developer or Regional Developer, Multiple/Single Units?
• Geography, market, product/service and resource issues
• Nuances of Individual Countries
• Seek Advice – local Franchise Associations
• Pilot Units – a Recipe for Success
TOP TIPS
• Adapt to Local Market• Invest in Market Research• Test Transferability & Receptivity• Invest in Pilot Project• Protect Trademarks• Refine Candidate Profile
TOP TIPS
• Internationalize Materials• International Webpage• Formulate Realistic Fees• Encourage Prospects to talk to Franchisees• Conduct Due Diligence on Prospects• Devise Realistic Development Schedule• Hire Translators
TOP CONSIDERATIONS:Cultural & Business Differences
• Introduction to signing.
• Don’t frighten prospects away.
• Time for a sandwich?
• Don’t rush things.
• Their email must be down!
THE CHALLENGESBarriers to Franchise Entry in Europe
Source: NatWest Bank
Legislation
Language
Lack of Qualified Franchisees
Control Problems
Lack of Finance
Cultural Barriers
Business Culture
EU Regulations
Lack of Demand for Service
Recruitment of Qualified Managers
EAST VERSUS WEST:Challenges in the EAST
• Relatively smaller markets• Royalties higher than
competitors• Actual and psychological
distance• Availability of real estate• Lack of brand awareness• Experience required!
EAST VERSUS WEST:Challenges in the WEST
• Difficult to obtain operating licenses
• High cost of real estate
• Local regulations can be strict
• Entrepreneurial culture
• Finding the right partner!
LEVEL OF OPPORTUNITYSource: U.S. Commercial Service 2007
• GOOD Austria, Belgium, France, Germany, Slovakia, Spain,
Sweden, Switzerland, United Kingdom.
• VERY GOOD Greece, Portugal, Romania, Serbia.
• HIGH Finland, Ireland, Turkey
BEST PROSPECTS Source: U.S. Commercial Service 2007
Sector No. of CountriesFood/Restaurant 12
Business Services 10
Beauty & Personal Care 8
Real Estate, Senior Home Care, Children/Education
7
Health & Fitness, Cleaning, Maintenance 6
Apparel/Fashion 5
Automotive, Hotel, Travel & Car Rental 4
Training Services, Express Delivery 3
Interior Design, Laundry/Dry Cleaning, Recruitment,Security & Environment
2
Entertainment 1
Our Customized Services
• Expert counseling for new to mature franchisors• QuickTake for Europe!• Franchising Gold Key• Single Company Promotions• Business Facilitation Services• Trade Missions• USA Pavilions at International Shows• Counseling & Matchmaking at Domestic Shows• Introductions to Local Franchise Associations• Webinars on International Market Opportunities• Regional Education & Development Conferences
EXPORT SUCCESS STORY PORTUGAL
• In 2005, awarded a Master Franchise for Portugal
• Initially planned to open 30 units in Portugal by the end of 2004 and 20 more in subsequent years.
• As of April 2007, 54 units already opened.
PORTUGAL SNAPSHOT
• 3% share of GDP
• 1.2 % of total national employment
• 63,000 jobs generated
• 4,100 new jobs in 2006
• 900 new units
• 10,700 total units 18%
9%
6%
4%4%
2% 6%
51%
Portugal
Spain
USA
France
Italy
U.K.
Brazil
Others
2006 IIF – Franchising by Country
EXPORT SUCCESS STORY IRELAND
Franchising Shows & Trade Missions
• September 2007 – Russia
• October 2007 - Italy, Ireland, & United Kingdom
• November 2007 – Ireland
• March 2008 – France, Greece & India
• May 2008 – Australia
• October 2008 – Asia
Websites
•Franchising E-Market Express
www.buyusa.gov/eme/franchising.html
•European Franchising Federation
www.eff-franchise.com
•International Franchise Association
www.franchise.org
•European Franchising Network (legal support)
www.europeanfranchising.com
Contacts
Finola Cunningham
Team Leader, Global Franchising Team
U.S. Commercial Service, Dublin, Ireland
Tel: +353-1-667-4753
Email: [email protected]
THANK YOU!
