Franchisors need to adapt to local markets – Germany is the perfect example of a territory where being prepared can be the difference between success and failure.
Germany is well known as one of the world’s most powerful economies, with a well-earned reputation for reliability, efficiency, and hard work. With its 82-million- strong population, it is a very attractive prospect for franchising. However, many franchisors underestimate the challenges involved and the importance of developing strategies appropriate to the country’s attitudes.
Understanding the German attitude towards business in general, and franchising more specifically, is critical.
Self-determined and risk-averse Germans can take a lot of persuading to become franchisees, so you should be ready to put the work in. Fortunately, this is more down to their native industriousness and desire to carefully assess business opportunities before getting involved than any general resistance to franchising. With the high availability of well-paid jobs for skilled individuals, there is less incentive for people to pursue self-employment than many other countries.
“Understanding the German attitude towards business in general, and franchising more specifically, is critical”
When they do decide to make this leap, Germans tend to be more inclined to go it alone before considering a franchise. With the right support behind them, the initial costs of starting a new business seem a lot lower than investing a large sum upfront into someone else’s brand. Of course, we know that this is short-sighted – both short- and long-term risks are greatly reduced when joining a franchise compared to striking out on your own – but Germans have a strong desire to build their own success. As a result, Germans tend to approach franchising with a more cautious attitude and will need more assurance that they are getting value for money than many other nationals.
Focused on the details
This is not to say that franchising does not work well in Germany – quite the opposite, it has huge potential. In fact, franchising is an extremely successful sector in the country, but you will need to invest heavily in marketing and be ready to spend the time necessary to work with a great number of applicants and enquiries before getting results. In Germany, franchising is very much a numbers game. German prospects will want to gather a great deal of information about you before making a decision and will be very meticulous in assessing the viability of your brand. You can expect potential prospects to raise a lot of concerns and objections during this process, and it can often seem that they are more focused on why a franchise will not work in their country, rather than why it will. However, it is important to remember that this does not reflect a negative attitude towards your brand as much as it does a desire to make sure that they are making the right investment. Once they have made that decision, you can expect them to commit totally to the franchise’s success and take their responsibilities very seriously.
This can be challenging, but there is a great opportunity for franchisors here too if it is addressed in the right way. Having a very well-structured model that is meticulously planned out will make a very good impression on German investors and help you differentiate yourselves from the competition.
Making sure that you understand how the local market works, and anticipating the many questions and challenges that potential franchisees will throw your way, will give you a huge advantage when expanding into Germany.
“Germans can take a lot of persuading to become franchisees, so you should be ready to put the work in”
Once you have negotiated these challenges, you can expect German partners to put in a great deal of hard work and become some of your most committed and reliable franchisees. Germany is a rich and rewarding territory to move into, but making sure that you get the right advice and guidance is absolutely essential.
Demonstrating that you have sought this expertise, be it from local representatives or other international consultants, will go a long way in reassuring German investors that you have what it takes to make your brand work in their country.
TOP TIPS FOR EXPANSION INTO GERMANY
Our many years of experience in Germany has shown us that there are certain things that are absolutely critical in persuading potential franchisees that your model is ready for the German market. There is a great deal to think about, but we have summarized the most important advice for you here:
• You must have a very professional package of marketing materials in place ahead of time. A good-looking brochure or prospectus is not going to be enough. Make sure that you anticipate all the questions you will receive and have all your pre-contractual information, operational details, and financial projections in place before you approach prospects.
• Make sure that any communication between you and your prospects is consistent and on time. A reputation for reliability and diligence is essential in this market.
• Make sure that you communicate as much detail as possible, not only about your brand and operations but also about how you deliver value for money and the potential for return on investment.
• Arranging discovery days is essential to persuading prospects to invest in your model. They will want to meet you, and your team, in person and see the operation with their own eyes before making any decisions.
• Use a German lawyer when drawing up contracts, and local consultants to represent you where possible. This will show that you are committed to delivering strategies that meet the needs of the local market.
• Make sure that you have a comprehensive plan for training and ongoing support that offers good long-term returns on their investment in your brand.
Farrah Rose is head of international development at The Franchising Centre, and is a long-term member of the British Franchise Association.
Rolf Gerhard Kirst is an international franchise consultant and broker at Franchise Pool International.