Franchise Focus Business News…

Ever since Isaac Singer wanted to spread his sewing empire through the US in the 1850s, the idea of franchising has been used as a means to transfer business knowledge and experience geographically.

A new type of franchising has developed in recent years; social franchising. Like commercial franchising, people work together to share ideas driven by a common social goal.

It’s just like a regular business franchise, without the monetary consideration.

Through the social franchising model, the health of women and infants throughout Africa has improved with Marie Stopes and Population Services International.

According to the European Social Franchising Network:

“To be a social franchise both the social franchisor and franchisees must be social enterprises (ie businesses that trade and have a social purpose) and there should be:

• An organisation that replicates a social enterprise business model – the social franchisor.
• At least one independent social franchisee that has been replicated by the social franchisor.
• A common brand under which the social franchisees operate.
• An interchange of knowledge between members.”

Providing sexual and reproductive health care, there are Marie Stopes franchises in Kenya, Ethiopia, Ghana, Malawi and Sierra Leone.

Population Services International may be the social franchise equivalent of McDonalds with clinics all over the world. Providing malaria, child survival, HIV and reproductive health services throughout India, Pakistan, Lesotho, Swaziland, Togo, Uganda and other areas in Asia and Africa.

The social entrepreneur is a creature which has become more prevalent in the developed world since the recession with the search for meaningful work. Borne from the idea of corporate responsibility, where businesses work to give back socially to the community, the social entrepreneur focuses mainly on social change, with profit making a secondary consideration.

Social Franchising demonstrates how successful the knowledge sharing element of franchising is. Starting off a new business can be so daunting but the knowledge available from franchisors is what will get you through the tough times, and make sure you’re in the know from your first morning in action.

We can’t offer you opportunities to treat malaria in Africa, but several of our franchises and business opportunities have socially responsible approaches to trading.

Snak Appeal: Supports 25 children’s hospices throughout the UK and Ireland. The franchise distributes and collects ‘honesty boxes’ of sweets, with a proportion of the profits going to charity.

DE Photo: Has donated more than £800,000 to grass roots sports, charitites and schools. You can become a photographer, even with no experience, within an organisation thatis responsible about social growth in the community.

Juice Community: This network of Fairtrade franchisees  distribute ethically-produced fruit juices. You can participate in a profit sharing scheme on all orders supplied directly to major retailers by the company.

That number represents a 33 percent jump in the number of international units operated by those franchisors in the past 10 years.

In addition to the United States, countries such as England, Australia and Canada have found a high level of success in spreading their franchise concepts domestically and around the world. And additional players like France, Spain, and Germany are getting into the international franchising game, and also experiencing marked success.

With the launch of our new franchise portal for Mexico last month (and another soon launching for South Africa), it’s obvious that a worldwide financial malaise hasn’t stopped the growth of franchising. But where are some places where franchising may boom next?

The U.S. Department of Commerce estimates that over 75 percent of the expected growth in the world’s trade over the next two decades will come from developing countries, specifically emerging markets.

Eighty percent of the world’s population lives in these emerging markets, but they currently only combine for an estimated 25 percent of the world’s gross domestic product.

When you hear the phrase “emerging markets” typically the first countries to come to mind are the larger ones such as the “BRIC” countries of Brazil, Russia, India and China, along with maybe a couple others. However, smaller countries have future growth potential that simply shouldn’t be ignored.

Many of the countries that warrant consideration are part of regions once unified, but have since dissolved into historically-new entities. Places such as the former Soviet Union, former Yugoslavia, and other countries in Eastern Europe fit into this description.

According to the East Europe Franchise Association, the region – that also includes some countries geographically located in central Europe as well – is a vast and emerging marketplace for franchising consisting of 30 countries with over 450 million people.

So where are the main growth areas within this vast and emerging marketplace? Kristin Houston, leader of the U.S. Commercial Service Global Franchise Team, points to the countries of Ukraine, Slovakia, Poland, Hungary, and the Czech Republic. These five countries have grown 67 percent in the last three years alone. The sectors of retail, automotive services, real estate, education/training, hotel and hospitality, and quick-service restaurants are currently the most in-demand franchise areas.

Here are some additional quick facts on the franchise landscape in these specific countries:

Ukraine

• Around 42 percent of the Ukrainian franchising market consists of non-Ukrainian franchising brands
• Fast food is the predominate franchise industry in the country
• Some areas Ukrainian franchising businesses have been successful in include office supply delivery, outsourcing services, staff and management training, copy and printing services, and translation services
• Other franchise sectors with a strong base in the country are in customer service such as cleaning and washing services, repair, tourism, ticket delivery, organization of entertainment, etc.
• Banking and financial-related systems are newer areas gaining traction
• Franchise relations are regulated by the Civil Code of Ukraine and the Commercial Code of Ukraine, with special chapters of these acts dedicated to franchising
• Hotel and hospitality is highly regarded as a future growth area

Slovakia

• There are over 100 franchising models present in the Slovak market, of which about two-thirds are within the retail trade sector and about one-third in services
• The Slovak Franchise Association has adopted the European Code of Ethics for Franchising
• There are currently no specific regulations in Slovakia in regards to franchise agreements

Poland

• Has some of the most developed franchise systems in Eastern Europe
• There are over 300 franchising brands in Poland and more than 13,500 franchising outlets
• Around 30 percent of the franchising systems in Poland come from foreign countries with most foreign-based franchise systems coming from Germany, France and the U.S.
• Popular franchise sectors include the following: textiles, retail food sales, professional development services, body care salons (hairdressers’ services and beauty salons), fuel stations, financial services and fast food
• The majority of regulations applicable to franchise agreements are found throughout the Polish Civil Code, the Commercial Companies Codes, the Act on Abatement of Unfair Competition and many other laws since Polish law does not specifically regulate franchising agreements

Hungary

• The Hungarian franchise market consists of approximately 300 brands, 50 percent of which are Hungarian owned
• The other 50 percent of the Hungarian franchise market are either subsidiaries of international companies or Hungarian master franchisees
• Some of the first franchises in Hungary included popular hotel chains and fast food franchises
• Several Hungarian franchise companies are active internationally
• Under Hungarian law, a franchise agreement is considered an atypical agreement, and neither any specific law nor the Hungarian Civil Code regulates these agreements

Czech Republic

• There are around 150 franchise brands are in the Czech Republic
• Like many other European countries, the Czech Republic lacks legal regulation specifically applicable to franchising
• About 62 percent of the franchising concepts are in the service sector, and 38 percent are in retail
• Almost 50 percent of franchise concepts operate in food and beverage, real estate or clothing/shoes sectors

To fully find success internationally, a franchisor will have to adjust and adapt their model to not only the regulations (including currency exchange and tax laws) of where they desire to operate, but also that area’s language, working hours, and culture.

In addition, the fact that there are few established franchise laws in many of these countries shouldn’t discourage franchisors from establishing outlets in these countries.

Organizations such as the International Franchise Association offer franchisors who seek to operate internationally many of the resources needed during the process.

Also, although they are becoming more financially-sound and developing a stronger middle class, these countries still haven’t been cultivated by a high number of franchisors. Consequently, hopeful entrepreneurs within these countries are generally eager to learn business principles through the methods and procedures franchisors have to offer.

Franchise businesses have quite a bit to offer emerging markets because they are designed to be replicated. Thus, they require less experienced entrepreneurs to begin, and provide business-learning opportunities within a support structure. All of this can help emerging market countries further develop their economies.

According to Kristin Houston, “95 percent of the world’s potential consumers are beyond U.S. borders.” Going International is a way for franchisors to sustain growth opportunities for their business for years to come, and it wouldn’t be surprising to hear of major franchise growth in the East Europe region in the not too distant future.

Sources:

Franchising World Magazine (March 2011), U.S. Commercial Service, East Europe Franchise Association,

International Franchise Association, Australian Trade Commission

In a recent trip to the Australian cities of Melbourne and Sydney, the Australians’ obsession with coffee was widely apparent.

For those who automatically think of beers and a “Barbie” as the epitome of Australian food culture, perhaps it’s time to see a different side. Driving through Sydney’s inner city during the early morning, you don’t smell car fumes but coffee fumes from all the coffee houses dotted around the Australian metropolis. Australians are famously proud of their coffee culture, and are even accused of being coffee snobs. In fact, the Aussie coffee fickleness got so bad that McDonald’s have had to retrain their baristas and now have a campaign running “Love your coffee or we’ll replace it” – ad below.

One of the fastest growing coffee franchises in Australia is home grown brand – Pie Face. These kiosks were dotted all over Melbourne and Sydney and according to their franchise site , the brand seem set on developing gradually across Australia and perhaps New Zealand. I think the concept could work well in the UK and Ireland also. Serving an array of tasty pastry treats – pies are a quintessential snack for Australians, Pie Face also offer a selection of “wake me up” coffee strengths with fun names:

“Still Asleep” (Decaf) – for those who never wake up
“Tingle My Toes” (mild soft blend – my choice!) – a gradual rise for those non-morning people
“Open my eyes” (strong soft blend) – your normal cup of yummy, creamy java
“Start my heart” (mild hard blend) – for the decisive, go-getter out there
“Kick my arse” (strong hard blend) – a jolt for freaks and over-achievers

Also within the marketplace, Gloria Jean’s coffee which since 2009 is now 100% Australian owned is hugely popular in Australia and outlets appear around every corner.  Their understanding of the value Australians attach to coffee is exemplified in the advert below which might explain their success. Also, as pointed out in the ABC article linked to below, Gloria’s also took a slower route to expanding across Australia and allowed the marketplace to discover their stores rather than rolling out an invasive and pushy ad campaign which seems to irk the Australian coffee lovers who, it seems, don’t like to be told how to drink coffee!

Famously, Starbucks the global coffee brand failed to nail it when they launched in Australia in 2000 and a few short years later had to close down 65 of their 85 stores in 2008. Speaking on the closures, Founder Howard Schultz commented that there were “no other international markets that need to be addressed in this manner.” Australian Advertising Creative Director John Mescall writing for ABC, attributed the closures to an over confident and hasty expansion by Starbuck’s into the Australian market, preventing the coffee brand from developing organically, allowing Australians to “discover” the brand rather than the brand’s ethos being forced onto the market. The market also rejects fancy coffee names favoured by Starbuck’s and the beverages come into either regular or large, something Starbuck’s chose not to adopt.

That’s the thing with brands – both franchises and licensing systems like Starbucks, expanding internationally, they need to be able to adapt to market differences in order to succeed. This is something McDonald’s has done well, with a few bumps along the road as highlighted by my few blogger Donny on his trip to India. I’ll look at McDonald’s and other QSR franchises in my next blog post on franchising in Australia.

Our German Site Representative, Patrick Marschner recently attended a franchise fair in Germany – “START-MESSE”. First set up in 1998, the show has become one of the biggest franchise shows in Germany and this year featured 160 exhibitors.

The show also featured a number of discussions amongst industry professionals on topics addressing the franchise industry in Germany including  “Innovative business-set-ups”, “How to finance a new company”, “company succession”, “Senior Coaching” and “From unemployment to your own business”.

The shows organisers estimate that roughly 4500 visitors attended the show this year and found that beauty, fitness and health concepts were very popular along with the usual favourite - food franchises. Visitors were delighted to taste a small range of the franchisors’ products directly at their stands and judge the quality of their food themselves including coffee and different cakes at the BackWerk-Stand and ice-cream at the Langnese Happy Station.

Even though there were fewer visitors than expected at this year’s show, the outlook for franchising in Germany is still positive and Patrick got positive feedback from his clients.

Click here for more information on franchising in Germany, please note this site is in German. However, click the following link if you would like information on UK franchises available in German (information in English). Here’s some pics Patrick took during his visit:

Frau Dannenberg

Frau Hoyer and Herr Gellrich

Herr Roßleben and Herr Matthes

Recently, I spotted this article in the Irish Times on food franchise giant – McDonald’s. We’ve known for quite a while how diverse the Golden Arches franchise are when it comes to their international operations and also how dynamic they can be in terms of adapting their menus for different cultural traditions and customs, and for their increasing awareness of healthy eating. So news that McDonald’s in Ireland are to completely revamp all 82 McDonald’s outlets across Ireland in the coming months, in order to incorporate their new healthier image came as no surprise.

Following controversy and negative media which resulted from a series of productions such as the SuperSize Me movie and the book - FastFood Nation, McDonald’s overhauled their image and menus. This has led to a number of other food franchises following suit including Domino’s Pizza, Subway and KFC. This hasn’t protected them from receiving criticism however. Michelin Star chef Anthony Bourdain has called McDonald’s “The Evil Empire” and has taken drastic measures to discourage his two and a half year old daughter against the franchise by demonising Ronald McDonald and is also threatening to “dip something decidedly unpleasant in an enticing chocolate coating and wrap it carefully in McDonald’s paper”, leaving this somewhere he knows his unsuspecting daughter will find it so that she can experience “an early, traumatic, Ronald-related experience [which] can only be good for her.” The first time I heard about Bourdain was when my brother, a chef, gave me his copy of Bourdain’s autobiography Kitchen Confidential to read. So yesterday when I saw Bourdain’s comments, I immediately contacted my sibling chef via SMS who replied “K*&b end. Can’t beat the occasional big mac. Been known to slip one past the lips”. He later went on to cook for 50 people on a fancy yacht in Sydney Harbour, but refrained from serving them Big Macs.

So, is it the view of all food snobs that if food is “mass produced” then it is therefore completely unworthy of consumption? In saying that, McDonald’s meat is 100% Irish which is saying a lot more than other burger outlets in Ireland. I would never suggest that a trip to your local franchise restaurant is anything like a trip to Maxim’s, but it doesn’t necessarily have to be an example of bad eating.

Some foodies seem to believe that franchises eliminate the creativity involved in creating food and lack the diversity that a stand alone restaurant can offer, as they change menus every week in some cases while franchises tend to stick to the same menu for a longer length of time with no deviation. However, a lot of franchises adapt their menus for new markets and often source food locally and only what is in season. My fellow franchise blogger Donny recently visited India and commented that McDonald’s, after issues with the cooking of fries in beef fat caused riots outside their outlets, have become quite culturally sensitive and feature a varied menu with no pork or beef to respect religious beliefs.

I think perhaps education and moderation is key, too much of something is never good and I’m pretty sure that even McDonald’s and Domino’s wouldn’t recommend eating their products every day.  Enjoyed as a treat every now and then, food franchises offer lots of families across the UK the opportunity to eat out as a family and to eat from a relatively healthy and low cost menu.

In comparison, it’s a well known fact that a significant number of gourmet chefs add unknown amounts of butter and salt to their food to add to the flavour, except you don’t know how much because that information is not freely available in restaurants, yet it is with an increasingly amount of franchises. Visit the website of most of the leading food franchises, and I bet you will find details of the nutritional information for their products, Subway in particular have been very proactive with this freedom of information tactic. Domino’s recently carried out focus groups in the US and used the feedback to redevelop their recipes, see the video below to see the redevelopment in action: