Sounds + Food 'n' Retail

Top-franchises in Germany

I just picked up the German magazine "Starting UP" (initial impression, so-so), which featured a number of stories interesting to me. One was the 30 top-franchisers in Germany. I'm a little confused by how they rank these things (English translation: annual growth-rate of franchise and nominal growth-rate), which resulted in some kind of numbering system, where the number 1 got over 3000 points, and the number 2 939 points. Actually, I'm more than a little confused, but it's probably too early in the morning to me.

In any case, the number 1 was Subway, which grew from 190 German partners in 2004 to 600 in 2007 (and got 3113 points). And number 2 is DATAC, which provides accounting-support and proprietary software. It grew from 312 partners in 2004 to 522 in 2007 (and got 939 points.. ah I see, nominal = probably company growth rate). I'll list some more in a second.

Unfortunately the article was very sparing with its analysis regarding what makes a good franchise, which I would've found useful. The advantages listed for Subway are however:

• Low initial investment (ca. USD 10k entry-fee; charges around 8% of profit + 3.5% advertising fee)
• Strong international brand (28343 partners in 86 countries)
• flexible venue-size (doesn't take up much space / can be take-away or seated)
• simple operation (no frying, etc.)
• large health-factor / range of ingredients

From their franchisee-brochure (pdf), I also got some more details on the help you get:

• A 2 week training
• Help with site selection
• Help with restaurant design (though I think personal taste is very limited)
• Help with equipment ordering

I have some more data about what it takes to run a good franchise, so I'll try to write more about it soon.

Back to the list. I segmented the list of franchises into what I considered their primary focus to be.

• Consumer-services: 4 (PC-Feuerwehr; Schulerhilfe; Agentur Mary Poppins; Stage-coach)
• Logistics: 1 (Fastway Couriers)
• Business services: 4 (Datac; Mail Boxes etc.; Im-Press Promotions; Ultimo)
• Food: 4 (Subway; Joey's Pizza; Blizzeria; Haagen-Dazs)
• Health: 5 (CC Calorycoach; Bellissima; Ruck Zuck; Curves; Alkromat-Patrouille)
• Retail: 9 (Engel & Volkers; Videotaxi; Town & Country; Harper & Fields; Mobilcom; Re/Max; Das Futterhaus; Tiroler Bauernstandl; Babyone)
• Installation-services: 3 (Twintop; ; Isotec; Scheibenglass)

Retail is the clear leader, probably because it requires very little in specialised (read: tacit) knowledge to be passed on from the parent-company, and distribution is of stuff like electronics is much easier than say for fresh foods.

There are other underlying factors in running a good franchise, which I will write about at another point. Important to realise is that just because a company grows fast, doesn't mean that it's actually a good company. Many franchises, in my experience, suffer from a lack of shared standards of quality, which can be overcome through a number of methods, but often suffers because of the lack of a centralised control over who works for the company and how they interact with customers.

I still think my last post on how to shift tacit knowledge into the explicit kind is relevant here (also the one on the knowledge-spiral), as what we are speaking of here is really similar. A company is not just the product it sells, but the values of the people, and how to communicate that down the chain is a vital skill for successful companies and franchises alike.

The picture is, if you're wondering, meant to display a room in which you have a choice of (food-)products to sell. Eh, yeah… I'll improve someday, I promise! ;-)