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FRANCHISING OPPORTUNITIES
ACROSS EUROPE
Mitchel Auerbach, Senior Commercial Officer
U.S. Commercial Service, Dublin, Ireland
Dillon Banerjee, Senior Commercial Officer
U.S. Commercial Service, Lisbon, Portugal
Trade Winds Forum
May 16, 2007
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OVERVIEW
• Franchising Today • International Franchising• Why Go International? Why Europe?• Franchising Across Europe• Legal Aspects of Franchising
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OVERVIEW
• Market Entry Strategy• Our TOP TIPS• East Versus West• The Challenges• The Opportunities• Best Prospects
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OVERVIEW
• Our Services • Export Success Stories – Ireland & Portugal• Franchising Shows & Trade Missions • Useful Websites & Contacts
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Franchising Today:U.S. Facts and Figures
• $1.53 Trillion Dollars
• Across 75 Industries
• One in Seven Jobs
• 50% Retail Sales
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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.
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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
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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
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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
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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
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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
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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
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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. o
f Fra
nchis
e Sys
tem
s
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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
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Impact of American Franchises in Europe
Source: U.S. Commercial Service - 2007
0%10%20%30%40%50%
% b
y U
.S. O
rigi
n
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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
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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
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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?
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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
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TOP TIPS
• Adapt to Local Market• Invest in Market Research• Test Transferability & Receptivity• Invest in Pilot Project• Protect Trademarks• Refine Candidate Profile
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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
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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!
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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
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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!
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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!
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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
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BEST PROSPECTS Source: U.S. Commercial Service 2007
Sector No. of Countries
Food/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
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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
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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.
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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
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EXPORT SUCCESS STORY IRELAND
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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
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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
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Contacts
Finola Cunningham
Team Leader, Global Franchising Team
U.S. Commercial Service, Dublin, Ireland
Tel: +353-1-667-4753
Email: [email protected]
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THANK YOU!