French-style franchising - an attractive model : No. 39, November 2013
French franchises are enjoying strong growth and great international success
A booming sector
French franchises are flourishing! As the leaders in Europe, they have seen their numbers double in the past ten years, with steady growth of between 8% and 11% over the last five years. The number of franchises is increasing by 5% to 10% annually - in 2012, there were an estimated 1,658 networks, with a turnover of €50.68 billion (compared to €47.88 billion in 2011).
It is a highly stable sector, with 84% of networks still owned by their founders. There is also a genuine capacity for innovation, as more than nine franchisers in ten have encouraged their franchisees to develop new products and services. All this activity creates jobs, with a total of 323,497 employees across 65,059 sales outlets, and each franchised store has an average of 5.6 employees.
Personal and household goods, hotels, food and hairdressing are the most buoyant sectors, representing 60% of the overall turnover from franchises, in particular due to continued growth in the fast food and food retail sectors. Another area which has seen spectacular growth in recent times is personal services, in the form of multi-service or specialized franchises, including home help for elderly people.
A true international success story
The French franchise model exports well and actors in the sector have made a major contribution to developing the concept abroad. The French Franchise Federation (FFF) has worked to create national federations in Spain, Portugal, Morocco and Lebanon. Furthermore, almost one third of French franchisers already have sites abroad. According to a recent FFF survey, 24% of these networks are in Europe, 14% in Africa, 9% in Asia - a high-growth market - 9% in the Middle East and 6% in North America.
It is naturally the major brands which are the first to establish themselves internationally, capitalizing on their experience and solid reputation. In the personal goods sector (e.g. clothes, shoes), there are over 100 French networks operating in foreign markets, while bakery, restaurants, services, hairdressing and luxury goods are also growing sectors.
In general, however, French franchises prefer to be well established in France before venturing abroad. For example, by the time the first international franchise of the Solvimo property network opened up in Miami, it already had 160 branches in France. But for others, such as the recently-established footwear company Finsbury, going international was part of their business model from the outset. It is also common for franchisers to be approached by foreign investors interested in their concept - accessories specialist Lollipops had only opened three stores in France before being wooed by a foreign partner barely two years after its launch.
In 9% of cases international expansion occurs via joint ventures (the network and foreign franchiser are partners), while in 37% it is through direct franchises (the network deals directly with the franchisee). Meanwhile, 42% of networks prefer to operate as a master franchise (an investor obtains rights for an entire country). This is the case for dry-cleaner’s 5 à Sec which has 1,900 branches in about 30 countries and continues to expand internationally, mainly as a master franchise.
In their international strategy, networks must adapt to local practices: to set up in the United States, property franchisers had to get used to working with many commercial agents rather than with employees, while car franchisers such as Midas or Point S had to consider various environmental standards when setting up abroad. Contracts must also be adapted to different regulations, and availability, tastes and customer habits in the local market must be accommodated. Happy does not sell the same flower bouquets in Japan as it does in France; Planet Sushi does not design its restaurants or prepare its meals in Ibiza in the same way as it does in Paris. This commercial adaptation is sometimes cross-border: to adapt its range, Lollipops created consumer zones, which sometimes include several countries.
For further information:
www.franchise-fff.com (in French)
* 1,658 franchised networks
* 323,497 employees in France
* Strong international presence