Franchising

Franchising is booming in France. With one of the largest and most developed markets in Europe, franchising plays a vital role in French business culture for large, medium and small-sized companies. France has a long history of franchises, kicking off in the 1960s with the development of hypermarkets and the shopping malls that typically surrounded them.

A French Franchise Code of Professional Ethics was established already in 1972 and later laid the foundations for the European Franchise Code of Ethics which operates in most EU countries today and serves particularly as a reference for jurisprudence.

As of 1990, the Loi Doubin was implemented to safeguard the interests of franchisees by insisting on transparency from the franchisor. This helped boost the market further as it set clearer definitions. At the end of 2004, France boasted some 765 domestic franchised networks. When non-French franchisers are included, the figures rise to 835 franchises. Franchises represent nearly 7% of French trade.

The table below highlights France’s key position in Europe: leader in terms of number of franchisers and employment. Figures for all of Europe are sometimes difficult to compare but according to the European Federation of Franchising, there were some 5,637 distinct franchise brands operating across 20 European countries.

The French federation of franchising has recently published its 2005 overview of franchising, in which it contacted 407 franchisees and 133 franchisors. Interested readers can contact us directly but in brief, the survey found the sector in good health.

The distribution sector accounts for 55% of all franchises in France, outweighing the service sector which makes up 40%. Services, however, have seen a higher level of growth since the 1990s and in some markets, notably the US, services now make up more than half of all franchised networks. Most recently, a third category of franchising has emerged, that of industrial franchising which involves technology transfers, industrial licensing and engineering. Industrial franchising is particularly orientated towards export markets.

Already one of the largest markets, franchising was given an additional impetus by recent legislation that encouraged franchises in the service sector. The growth of the service sectors reflects changing French consumer habits and household needs.

The activities with the strongest growth are in areas like real estate and services to households such as house cleaning and home care, child-minding and educational gym. Given the levels of investment needed, services can often be more re-active: the Loi Carrez, obliging home sellers to provide termite and lead testing, was introduced in France just a few years ago but has already sprouted half a dozen franchisors.

The following table details the business sector of the franchised networks and the number of franchisees, in France in 2004.

The above table highlights the obvious dominance of retailing. But the other striking feature of the table is how few non-French are present in the market. In terms of number of franchisors, just 10% are not French. On the other hand, one third of French franchisors claim at least 1 franchise outside France. Non-French franchisees are most present in clothes retailing and in fast foods.

Many of these are large, multi-national groups. McDonald’s has a significant presence in France, with 867 outlets. But for the country that prides itself on its historic cuisine, McDonald’s has had to adapt its magic formula: the group now states that the French market is one of its most creative and innovative and indeed, the recently appointed head of McDonalds Europe is a Frenchman. More than half of all French franchises are small to medium-sized companies.