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European Franchising – Trends and Developments

The franchise industry in the European Union has tremendous growth possibilities. With over 500 million consumers in 28 nations, many franchisor companies worldwide, especially U.S. businesses, are eager to expand franchise units into Europe.

Consumers naturally think of American brands when it comes to franchising – and for good reason since many popular brands, such as Burger King and McDonalds, still dominate as leading franchises.  But one look at the current Top 500 Franchises in Europe indicates that even though American brands are still hugely popular, many franchises originating in European countries have also become big names across the continent and beyond.

Some of the most successful European franchises include:

  • Spar, a franchised Convenience store founded in the Netherlands in 1932, it has over 12,300 franchised stores.
  • Bata, a footwear retailer from the Czech Republic. Since its beginnings in 1939, now has 1,200 shops.
  • Benetton, a fashion retail store offers Italian fashion for men, women and children. Its network expands to over 6,000 franchised stores worldwide.
  • Etam, a high street brand that retails clothing and lingerie. The first franchise opened in 1925 and today there are 4,200 stores.

European franchises that are expanding internationally naturally tend to spread into bordering countries. Because the UK and Scandinavian countries have long established commercial alliances, the export of and establishment of franchise brands among these countries is a natural outcome. Most other non-European or US brands operating in the EU come from Canada or Australia.

Though many leading franchises are in the food industry, European franchising is proving to be as diverse as consumer demand, with many businesses catering to home services, automotive repair, lodging, retail merchandise, education, travel, dry cleaning, construction and many other industries.

Both European and non-European franchisors about to launch new operations in EU countries commonly use these methods:

•    Through direct franchising

•    Setting up a subsidiary or joint venture

•    Master franchise licence or area developer

The Master Licence grants an individual to sell franchisee rights within a fixed territory, such as an entire country. The Master Licencee in effect becomes the franchisor for that country and sells franchise licences. An Area Developer actually runs franchise units rather than sells licences in an assigned territory; and must have substantial resources to invest, backed by business experience.

One new and increasingly used practice in international franchise development are 'test periods' of one or two years, during which time the franchisee operates as an Area Developer and must meet minimum unit openings and operation before advancing to a Master licence.

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