Why Franchising in Germany Could Be a Lucrative Opportunity
While crossing borders to expand the business, one faces many difficulties due to cultural and language differences. To overcome these differences, one needs the help of a third party. In Germany, Franz-Josef Ebel, the Founder & MD, Master Franchise Germany, is the one who can help in avoiding these pitfalls.
In an exclusive conversation with Franchise India, Franz-Josef Ebel gave insights on what is the scenario of franchising in Germany post-Covid and what are the future possibilities.
Why Franchise in Germany?
Germany has a population of 82.8 million with a good disposable income. GDP per capita is $50,000, which is at a 10% drop right now. Germany has the strongest economy in Europe. The franchise business model is accepted in Germany and has been growing even after Covid. There are more than 950 franchise brands in the country.
Germany can be an attractive market for Indian brands. Consumers in the country like Indian cuisine and restaurants. Also, Germany has fewer franchise regulations.
According to Franz, there is a lot of opportunity in franchising in Germany.
Franchisees in Germany are risk-averse people. Post-Covid, it is more people are having a risk-averse attitude that only adds on the opportunity to franchise.
With the rising unemployment and declining job vacancies and importance to numbers more than emotions, the chances of franchising have increased. But, on the other side, the property rent hasn’t seen any decline and is still high. The labor costs are also the same but are expected to fall in near future.
Another challenge when you come to Germany is that your brand is not a brand in Germany unless it proves the business care for Germany.
Approach to Enter Germany
There are three ways to enter the German market:
To Open a Master Franchisee - This has a weak control and high risk. You need to find the right German partner for this, which might be a time-consuming process. The master franchisee does all the pilot study and the franchise is on a revenue-sharing basis.
Owning A German Subsidiary - This has a high control but low risk. Here you need to employ a German CEO who will do the pilot study. The partnership will not be on profit sharing.
Multi-Unit Franchising - This has a balance of control and risk. It is becoming more popular. You have to find the right franchise partner who will do the pilot first. Then the Indian HQ does the franchising.
In the current scenario, any stationery kind of business where there are outlets is difficult to run right now. But the online services, logistics, security, online education are all covid proof and benefitted at the time.
Anything that will add value to the consumer experience is going to go well in the new normal as well. Currently, with the changes in the environment, franchising and entrepreneurship have been benefitted in two ways. One, the start-up culture was kind of competitive with the franchising. But now, people do not want to take risks and are opting for franchising as a start-up. Second, increasing entrepreneurial requirements has also given rise to the need for franchising. People are insecure about jobs and looking for their own jobs. Hence, the shift is towards franchising.
At last, Franz mentions that any franchising should not be an outcome of a forced situation. If the risk profile under forced circumstances, then it is better not to take up franchising. Franchising needs time and effort.
Edited By: Vaishnavi Gupta