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 2019 – Continued Dynamic Growth

  • 4.2% more franchisees
  • 0.2% more employees
  • increase in sales revenues of 5.1%

The German franchise industry developed dynamically in 2019. This is confirmed by the statistical evaluation for 2019 issued by the German Franchise Association. The evaluation shows that there are around 960 franchise systems across Germany with more than 133,000 franchise partners, 4.2% more than in the previous year. Overall, there are just under 172,000 (+ 2.3%) franchise businesses with around 717,000 employees, representing an increase of 0.2%. These figures reconfirm a clear growth trend for partners, companies and employees. This positive development is made even clearer by the total revenue – at EUR 129 billion, this figure has risen by 5.1% compared to the previous year.

Source: German Franchise Association

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