Germany and Franchising – Still, Alive and Well
Franchising makes sense in Germany because the German people are really less entrepreneurial than what we expect let’s say here in the United States. As a retired franchisor, I can tell you that the most successful franchisees were a little less entrepreneurial than you might think. If one was too much of an entrepreneur spirit, they wouldn’t follow the system like they should, they’d instead try to re-invent stuff all the time.
Franchising in Germany is very similar to that in the US, same basic format such as a franchisee initial fee, royalties, brand Germany News name usage, and ten year term of the contract. Of course, there are many restrictions that make it difficult such as the way the Germans have set up towns to have only one vendor for the town for something like a carwash, thus there can be no other carwash start-ups come in. In this case a Franchising Company could not offer that town as an exclusive territory unless the city approved it and that is a huge hassle for a rapidly expanding franchisor.
However franchising in Germany has been going on for over 50-years and it is appreciated as it provides jobs locally and economic development, thus, well received by consumers and the powers that be. My franchise mentor, when I Founded my franchise company has taken Ray Kroc of McDonalds to Germany and helped him get things going there and as you can see things are still going well, but some things have changed. For instance according to Wharton Business School:
“Germans are widely considered to be risk-averse, and Germany is hardly the first country one associates with entrepreneurship. Indeed, for typical middle-class Germans accustomed to long-term employment in their field of training, entrepreneurship is often seen as complex and full of uncertainties. Franchising, however, represents a means of avoiding many of the risks associated with starting one’s own company.”
Wharton also tells that the German Franchising Association shows over 55 thousand franchisee in Germany and some 900 franchisors, who are represented. Most from other nations with franchised outlets in country, but some are homegrown franchise companies exporting their German Brands to the rest of the World. This is good news for trade and shows that the franchising sector is a smart use of good trade practices. So, think on this.