Katalin Mandel is a trailblazer in the franchise industry, serving as CEO of the Hungarian Franchise Association for over 15 years, as well as an active member of the World Franchise Council and a leading figure in Europe’s franchise sector.
With extensive experience in leadership and strategic growth, she has helped to guide numerous brands to global success and co-authored several books. A passionate advocate for entrepreneurship, Katalin’s work continues to inspire innovation and empower franchise leaders around the world.
1. Micro franchises
A noticeable trend in the European region is the expansion of small-scale business concepts with low investment costs. These micro franchises are particularly popular in the Eastern European region and in smaller countries – e.g. Croatia and Hungary – but for these same reasons would prove successful in the Asian region and South America as well. The low investment means most brands in this category are expected to come from sectors without fixed locations, such as education concepts and services without high-cost tools (e.g. painting).
The key here is a decrease in disposable income and the generally shrinking trend for the middle class. Both of these factors would price out aspiring entrepreneurs from the market but enable brands with low-cost investments to thrive.
2. Reclaiming the East
Since the pre-2000s, international growth in regions like Europe has slowed significantly and, in some cases, even reversed. As markets got saturated, market penetration became harder, especially in less developed countries where the costs of a Western franchise could not be justified by the local purchasing power.
However, I believe COVID made a significant impact – and created a hole in the market for international brands to finally find their foothold in new regions. Iconic American brand Taco Bell has just started its growth in new European countries and Wendy’s has announced plans to open its first branches in the region.
I believe we are going to see more restaurant brands, particularly leading U.S. franchises with high resources, capitalize on the vacuum left by the pandemic. In general, I think it would be wise for franchisors to consider less developed countries, as these provide the easiest opportunity for growth as they catch up with the standards of Western markets.
3. Education opportunities
Like dining, education was thought of as a saturated sector, but we expect to see explosive growth in both the number of brands and in diversity, especially. The trend is fueled by the declining quality of education in most countries, and the significant drop in PISA test scores in OECD countries over the years, especially since 2020.
The increasing complexity, mixed with distractions through social media, makes parents fear for the future of their children and look for opportunities beyond state-funded schools. This is supported by the growth of low-cost micro franchises, since most education concepts require upfront investment or fixed locations.
4. Return of expo marketing
Despite the dominance of online marketing in franchisee recruitment I think we will see the return of live events in the coming years. In Hungary last year, we held the first expo since the disruption of the pandemic and saw great interest. This is also the experience in other markets around Europe, such as the leading events in Paris, Frankfurt, Warsaw and now Budapest.
“Despite the dominance of online marketing in franchisee recruitment I think we will see the return of live events in the coming years.”
Katalin Mandel
Since the restart of live events, we still have most of the growth ahead of us and I expect to see a re-balancing of marketing budgets away from online marketing and back to live meetings. We helped several brands find new partners this year and particularly found the expo to be a good tool for this recruitment. I hope I can use this expertise to help the growth of more international brands in Hungary.
5. Appeal of multiples
Large-scale franchise partners were limited in numbers in Europe generally. However, the past few years have seen a growing interest in joining or operating more than one brand. This provides access to safe capital as well as experienced operators who already know the ins and outs of franchising. Although finding these investors can be challenging, expos and active recruitment campaigns will see more international brands look for growth in this region.
6. Popularity of automated brands
Investors are looking for more automated brands, where they need to rely less and less on employees. This is due to the increasing workforce costs, especially in developed markets, and the changing attitudes of Gen Z, which makes them less reliable due to frequent changes in employers and higher expectations.
In Eastern Europe, automated brands are the latest trend in franchising, with emerging businesses including self-service laundries (not present before), automated grocery stores and storage services.
Even brands in mainstream sectors (like B2B and catering) are looking for ways to automate their processes and limit the weight of the workforce. Since this makes operations easier in the long term, some investors are now specifically looking for brands that offer such solutions – for example, automated storage services are appealing to investors as they can operate without the need to be present on the premises.
Franchise systems that are not keeping up with automatization will find it harder to attract new partners in the future.
