Europe focus: Italy – Europe’s middle-class renaissance | Global Franchise
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Europe focus: Italy – Europe’s middle-class renaissance

Insight

Europe focus: Italy – Europe’s middle-class renaissance

Despite much of Italy’s franchise activity focusing on cities like Rome or Milan, businesses can succeed anywhere in the country

Despite much of Italy’s franchise activity focusing on cities like Rome or Milan, businesses can succeed anywhere in the country.

Words by Kieran McLoone, deputy editor for Global Franchise

ITALY IN NUMBERS

Population: 60.36 million
Size: 301,230 sq. kilometers
GDP: $2.08tr
Franchise market value: $32.5bn

Italian franchising actually has a very specific birthday, according to the Italian Franchise Association. On September 18, 1970, a large-scale distribution company, the ‘Gamma di’, launched 55 stores throughout Italy, which were to be managed by a dozen affiliates. Thus, franchising was brought to Italy’s shores and has since grown into a thriving industry providing employment, profits, and exponential success.

Always improving

To date, the Italian franchise market is worth around $32.5bn, which is a 17 per cent increase across the past decade. Across this same period, foreign investment in Italy through franchising has increased by as much as 35.8 per cent. It’s undoubtedly an industry on the rise.

Domestic brands still occupy a large majority of the market, however, and of the 961 franchise networks that existed in Italy in 2018, 861 were of Italian origin. This figure positions Italy as the fourth largest franchise market in Europe, following Spain, Germany, and France.

Most of Italy’s franchise networks can be found in the wealthier North, and franchise locations are primarily situated in city centers and shopping malls, typically in large cities such as Rome or Milan.

The Lombardy region of Italy, located in the northwest, brings in the most of Italy’s total franchise turnover at 16.5 per cent.

Franchisors shouldn’t exclusively aim for cultural hotspots like Rome, as Italy has a thriving middle-class demographic that support sophisticated goods and services all over the country. This ensures the success of savvy businesses in smaller cities that have showcased exemplary adaptability, with stores in airports or train stations being just as viable as the usual high street and shopping mall locations.

Diverse by design

The Italian franchise market is diverse in several senses of the word; service franchises are the most common at 25 per cent of businesses, with food brands only making up 18 per cent. However, in 2016, the food segment brought in revenue of more than $9bn, which represented 32.2 per cent of the total annual turnover for that year.

The market is also considerably youthful. Almost 90 per cent of franchisees in the country are aged between 25 and 45 years old, according to the Italian Franchise Association, and low investment costs are one of the key motivators behind Italy’s continual growth: 34.3 per cent of investments don’t exceed €20,000, which equates to around $22,794, making franchising more approachable than ever.

“Franchising is confirmed as an increasingly growing and attractive sector, even for the youngest who are entering the world of work for the first time,” says Augusto Bandera, secretary general for the Italian Franchise Association. “The growing demand and the emergence of new formats are a symptom of a system that works and inspires confidence thanks to the reduced business risk.”

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