1. Features of the franchise market in Germany
The franchise market in Germany, one of the largest European countries with a high standard of living, is distinguished by a number of features, knowledge of which is key to the successful launch of a franchise business.
Firstly, the German market is characterized by high consumer purchasing power, which makes it especially attractive for franchises in the retail, catering, and service sectors. The second important characteristic is Germans' loyalty to brands and their tendency to trust proven concepts. This is a key factor in the success of renowned global franchises in Germany.
Another feature that investors should remember is high competition in developed sectors (fast food, coffee shops, fitness), where it is more difficult to find a free niche. The key to success here will be a unique product line, service, and location. Franchises are developing dynamically in relatively new but popular areas - eco-products, healthy eating, food delivery, courier services.
If you decide to buy a franchise in Germany in 2024, take into account the listed factors, choose a promising niche and franchisors with an impeccable reputation in the German market. There may not be a second chance, so take your choice of a franchise to open a business in Germany very seriously.
2. The most popular areas for franchises in Germany
The most popular franchises in Germany are traditionally in the fast food, coffee shops, clothing and footwear sectors. However, in recent years, new niches have shown active growth.
In particular, food delivery franchises are generating a lot of interest. Market leaders - Lieferando, Foodora, Pizza.de. This segment is actively developing against the background of accelerated digitalization under the influence of the pandemic.
Another trend is franchises related to a healthy lifestyle and environmentally friendly products. Natural products, vegetarianism, and fitness are gaining popularity. A striking example of success in this niche is the organic supermarket chain Denn’s Biomarkt.
Among service franchises, courier services (Hermes, DPD), cleaning companies (Clean Master), and exam preparation tutoring centers (Studienkreis) are growing in popularity.
If you choose a franchise in one of the listed areas in Germany for 2024, you can safely count on success.
3. Legal aspects of buying a franchise in Germany
The main document when purchasing a franchise in Germany is a commercial concession agreement between the franchisor and the franchisee. Please note that under German law this agreement must only be concluded in writing.
The agreement must contain all essential aspects of cooperation. Including the size of the lump sum fee, royalties, investments in opening a point, the procedure for using the trademark and know-how of the franchisor, validity period, termination conditions, etc.
Pay special attention to the language regarding the scope of the intellectual property rights being transferred to avoid possible disagreements in the future. A well-developed algorithm for terminating a contract when certain conditions occur is also important.
If you still have legal questions about purchasing a franchise in Germany, do not hesitate to consult with a specialist to minimize the risks of conflicts at the start.
4. Financing the purchase of a franchise in Germany
One of the key questions when buying a franchise in Germany is how to finance the opening of a business. Let's look at the main options.
Own funds. This could be personal savings, company reserves, or funds from business partners. This option is optimal, but not always available for large investments.
A bank loan for the purchase of a franchise is a common option. The loan can cover from 50 to 100% of the cost, the term is up to 10 years. The advantage is relatively low rates compared to other borrowing options.
Equipment leasing through a franchisor company. Popular when starting restaurants, cleaning services, and car services. Allows you to pay in installments for the purchase of necessary equipment.
Patrons and business angels. These are wealthy investors who are ready to invest in a promising startup at the initial stage for a share in the business.
State support and grants for small businesses. Relevant for certain industries, regions, social and environmental projects.
As you can see, there are many ways to finance the purchase of a franchise with minimal starting capital. The main thing is to choose the best option for you.
5. Risk analysis when purchasing a franchise
Although a franchise is considered a less risky business compared to opening a startup from scratch, there is still a degree of risk. The main ones include:
1. The risk of ineffectiveness of the franchise business model. To minimize it, check the franchise's success history, partner reviews, revenue and profit figures.
2. The risk of dishonesty of the franchisor. Research the brand's reputation in the market. Check for any unresolved legal conflicts or litigation.
3. Financial risks. Even an effective business model does not guarantee profit from the first months. Therefore, evaluate the feasibility of the payback period and have a financial cushion.
4. Competitive risks in the area and location chosen for the franchise. Analyze the level of current competition and market growth prospects.
Managing these risks will allow you to minimize possible losses from purchasing a franchise in Germany and extract maximum benefits from this investment.
6. Criteria for choosing a reliable franchisor
To minimize risks when purchasing a franchise, it is important to choose a proven, reliable franchisor. Main criteria:
1. Market success story. The company must have at least 2-3 years of successful experience, preferably 5-10 years. Check positive growth dynamics.
2. Developed network of franchises, including abroad. The more successfully operating outlets, the lower the risks of business model inefficiency.
3. Impeccable business reputation and the absence of negative information in the media and court cases. This demonstrates the company's customer focus.
4. Availability of registered rights to trademarks, patents, copyrights. Intellectual property protection is a must.
5. Transparent legal scheme for interaction with franchisees. A legally executed commercial concession agreement on terms favorable to the partner is required.
6. A full program of training and support at all stages of cooperation. This is the key to a long-term mutually beneficial partnership.
Using these criteria, select 3-4 reliable franchisor companies in your area and compare their offers before making the final decision to purchase a franchise.
7. Marketing and promotion of the franchise on the German market
When entering a new German market, competent franchise marketing plays a key role. The cost of a commercial concession agreement, as a rule, includes deductions for the franchisor’s advertising fund. But the franchisee himself must bear the costs of promotion in the region.
The main tools for attracting clients in Germany:
- Contextual and targeted advertising on Facebook, Instagram, Google (up to 30% of the budget)
- SERM website optimization and listing on aggregator sites like Oberlo
- SMM and maintaining franchise communities on social networks
- Affiliate marketing with local companies
- Printed mailing in the area where the point is located
- Promotions for regular customers (discount cards, bonuses.
A carefully calculated marketing mix will allow you to effectively promote your franchise in the difficult German market and achieve payback in the shortest possible time.
8. Features of taxation of franchise business in Germany
Taxation of franchises in Germany has its own specifics. Let's look at the main points.
Firstly, the franchisee pays personal income tax at a rate of up to 45% depending on the level of income. There is also a turnover tax for individual entrepreneurs - about 1% of revenue.
In addition, the franchisor may charge a royalty of up to 5% of monthly revenue plus a lump-sum fee for the right to conduct business under the trademark. These deductions are also expenses.
Let us note the simplified document flow for small businesses - you can only conduct simplified accounting. But as turnover increases, you will have to switch to filing full reports.
Also, from 2023, Germany will introduce a minimum income tax of 15%, which may affect large franchisees.
Take these features of franchise taxation into account when planning your budget and business return on investment in Germany. Consult with a local accountant or tax advisor in advance.
9. Finding the optimal location for a franchise
Choosing a good location is one of the critical factors for the success of a franchise in Germany. Key criteria when choosing a location:
- Density and purchasing power of the franchise’s target audience
- Passability of the location and visibility of the place for potential clients
- Level of rental rates and availability of suitable space
- Transport and pedestrian accessibility
- Lack of direct competitors of the franchise nearby or their low concentration
- Compliance with the target region for the development of the franchise network
- Prestige and safety of the area for doing busines.
Shopping centers, large transport hubs, and busy tourist areas are best suited. We recommend spending up to 30% of your budget on analyzing location options and choosing the ideal location to launch a franchise.
10. Drawing up a commercial concession agreement with the franchisor
The basis of legal interaction between the franchisor and franchisee is the commercial concession agreement. In German law, it is written in German and is strictly in writing with an official seal for legal entities.
Key aspects that need to be specified in the contract:
- The amount and procedure for paying the entrance and fixed lump-sum fee for the franchise.
- The amount of periodic royalty payments (% of revenue).
- The scope of transferred rights to the trademark and know-how (menu, design, technology, etc.)
- Breakdown of initial and current expenses (training, advertising fees, local costs).
- Timing and algorithm for the franchisee to exit the project.
- Responsibility of the parties and measures for violation of the terms of the contract.
Pay special attention to:
- Zone, terms, conditions of exclusivity (yours or the franchisor).
- Possibility of assigning the franchise to third parties.
- Possible sanctions and fines in emergency situations.
Do not skimp on in-depth legal elaboration of the commercial concession agreement together with the franchisor. Your success largely depends on this.
11. Training and support for franchisees in Germany
The main advantage of a franchise over starting a business from scratch is the experience and expertise of the franchisor, which allows them to reduce costs and risks at the start.
Therefore, a quality franchisor must provide:
1. Full training of franchisees and staff during the launch of the project.
2. Detailed instructions for doing business and scaling (operational manuals).
3. Regular consulting support on legal, accounting, and marketing issues.
4. Assistance in selecting suppliers, sites, personnel and other aspects of launching and developing a franchise.
5. Regular audit of efficiency and compliance with standards with personal recommendations.
6. Exchange of best practices with other franchisees and new ideas for development.
Choose a franchisor who is willing to provide this level of support at all stages of the partnership, and your chances of success will increase significantly.
Choose a franchisor who is willing to provide this level of support at all stages of the partnership, and your chances of success will increase significantly.
12. Most Popular Franchises in Germany by Industry
Let's look at the most popular franchises on the German market in different industries:
Catering:
McDonald's, Nordsey Food, Colai Ace, Baskin Robbins. American fast food remains the leader, but healthy food franchises, coffee shops, and desserts are relevant.
Beauty and Fitness:
Douglas, Unicosmetics, Cosmofitness, Holmes Place. Franchises of beauty salons, hairdressers, and fitness centers are in demand.
Facilities and services:
Deutsche Post, Avis, Sixt - in the field of logistics and car rental, CleanStar, Grunklean, Mister Proper - cleaning services.
Retail:
DM, Rosmann, Kik, Tedi, Takko Fashion - clothing and accessories, Obi, Leroy Merlin - goods for home and repair. International chain retailers are leading.
IT and consulting:
Compulink (Compeuterö), Vistum, TUF (North testing). Franchises for PC and gadget technical support and consulting are popular.
Also in demand are educational franchises (tutoring, trainings), coworking spaces, car washes and other concepts in the service sector. Choose a destination based on your preferences, experience and budget.
13.Franchisee success stories in Germany
As examples to follow, let's look at several successful cases of franchisees in Germany from different fields.
Olga S. opened her Prüfit fitness center in Berlin. Within a year of operation, it has recouped all investments and is now one of the top 5 most visited halls in the network. The secret to success is a convenient location and an emphasis on personal training.
Pavel V. bought the franchise of the popular Balzac Coffee coffee shop in a Dusseldorf shopping center. Thanks to the marketing support of the franchisor, he was able to attract regular customers among office employees.
Diana R. opened a beauty center under the Parisienne Cosmetique franchise in Munich. Unique French care technologies have allowed us to occupy our niche in the competitive environment of the German SPA and cosmetology market.
As you can see, by wisely choosing a promising direction and a reliable franchise with a unique selling proposition, you can count on success in the rich region of Germany.
14. Prospects for the development of franchising in Germany
Despite high competition, the franchising market in Germany has significant growth potential in the coming years.
Franchises will actively develop in the areas of online services, food delivery, courier services - in the context of the rapid digitalization of the economy.
Niche concepts in education, medicine, and ecotourism are also promising against the backdrop of sustainable trends for a healthy lifestyle and environmental friendliness. Like all over the world, franchises in the segment of beauty services and fitness will be popular.
Rich and brand-loyal German consumers, developed infrastructure, and comfortable business conditions create ideal preconditions for continued strong growth of franchising.
According to various estimates, by 2025 the share of franchising enterprises will grow to 10-15% of the total number of companies in Germany. This means even more promising opportunities for purchasing a profitable franchise in Germany.
