Although franchising had a late start in Europe compared to the Americas, Asia and the Mid-East, it is now a common and well-received business practice. Standardized European Union regulations also facilitate the entrance of international brands to the continent. Today, U.S. brands are extremely appealing due to their innovation, differentiation and well-defined business models. The current EU consists of 28 countries with a population of 510 million. This report considers EU countries where franchising is most active and the average GDP per capita is U.S. $34,500.
2017 was Europe's strongest year of economic expansion in more than a decade, with average GDP growth of 2.5 percent. Ireland is expected to lead the pack with GDP growth of 4.1 percent, with estimated growth rates of 2.7 percent in Spain, 2.4 percent in Germany and even 2.1 percent in France, which is its best performance in years.
Strong global economic growth is stimulating increases in European exports and direct investment, and falling unemployment and inflation rates across the region are increasing disposable income and levels of domestic consumption. Consumer confidence is the highest it has been in decades and average unemployment is at a nine-year low. From a EU-wide unemployment rate of 20 percent five years ago, the rate in 2018 is 7 percent and falling as new investment needs to fill jobs. As shown on the chart below, these countries vary widely in consumer market size, buying power and as places to do business.
According to various industry sources, there are 13,500 different franchise brands with about 700,000 franchised outlets operating in the EU today. The franchise sector in Europe is relatively mature, with close to 2,000 franchisors in France, and between 900 to 1,500 franchisors each in Spain, the UK, Italy and Germany. Total franchised units vary between 40,000 and 80,000 in each of those markets, across a variety of sectors.
U.S. CONCEPTS' ADVANTAGE
There are relatively low barriers to entry for U.S. franchise systems across Europe, although there are challenges such as higher labor wages and benefits, as well as regulatory requirements. Of the countries in this report, there are specific franchise related laws or regulations in Belgium, France, Italy, Spain and Sweden. The EU competition law has little impact on most franchises. These laws and regulations apply to all franchises whether local or foreign. There is a perception that U.S. franchises have...