About Franchising

One of the three ways to become your own boss

There are three ways to become self-employed: by founding a company, by taking over an existing company, or through franchising. It might not surprise you to find out that franchising is one of the leading trends worldwide and in Germany. When you consider becoming a franchisee it is vital that you can combine two character traits into one: being an entrepreneur with strong leadership skills while being a team player at the same time.

What is franchising?

Franchising is a cooperative business model that enables autonomous entrepreneurs to use the benefits of an established brand and/or company in exchange for a fee.

The franchise gives the franchisee the legal right to use its established and proven concept – in a certain location, county, country or regional zone.

The time frame for the allotted use of the concept is clearly defined in a contract drawn between both parties. During this time the franchise has free use of the name, the design, and the business model of the franchise to sell wares or services. The groundwork for the business model that is used has already been laid and tested at this point so that the franchisee takes over a well-functioning business idea. This significantly lowers the risk for a franchisee and his or her step into independence. In return, the franchisee pays certain fees to the franchisor, for example buy-in fees or franchise fees.

Franchising – a new concept?

Not at all. As a recent study of the German Franchise Association shows, the average age of franchise systems within Germany is around 20 years. Half of the franchise systems in the country were founded in the year 2000 or later. The oldest active franchise in Germany was founded in 1920!

41% of the systems started out in the time period 1980 – 1999. So “new” definitely looks different. However, what makes the franchise industry stand out is its agility – franchisor and franchisee are consistently in contact. This cooperation based on working together as a team is a steady process of learning and innovation – on both sides. An established franchise system that has been on market for a long period of time can therefore, at the same time, be young, agile, and on the front line of innovation.

The German Franchise Economy 2017 – Dynamic Growth

The franchise industry in Germany was a dynamic undertaking in 2017. Statistical insides from the German Franchise Association show that throughout the country 970 franchise systems had almost 124.000 franchise partners – an increase of 3,6 % compared to the year before. Those franchise partners in return employed more than 707.000 people (+ 1,3% compared to 2016). The continuous growth of franchise partners, systems, and employees has continued throughout the last years. It can be visualized best when looking into the sales growth of the franchise systems: with Euro 112,2 billions revenue in 2017, the franchise industry shows a significant increase of 8 % compared to 2016.