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Dec, 01 2006

France: Making Franchising History

ACOUNTRY\'S success depends on how strong its economy is. France\'s steadily growing economy is the six-largest in the world and has the lowest poverty rate amongst the large economies. According to World Bank and IMF figures, it is the third-largest econ

ACOUNTRY'S success depends on how strong its economy is. France's steadily growing economy is the six-largest in the world and has the lowest poverty rate amongst the large economies. According to World Bank and IMF figures, it is the third-largest economy in Europe. France's franchising sector adds a lot to the country's economy and is responsible for providing unlimited jobs opportunities.

Franchising is a market that has been growing for over twenty-five years in France and has become increasingly attractive. There is good reason for this. The franchisee is the owner of his or her own business and is legally independent, but, at the same time, benefits from the know-how and reputation of the network. Franchising has also gradually diversified from retailing to the service sector via restaurants and the construction industry.

Most importantly, it has organized itself primarily through the French Franchise Federation. Today, a potential or actual franchisee can benefit from the advice of the federation's panel of experts and meet the many franchisors who have willingly joined it.

Franchising history

Franchising in France can be observed since the earliest years of the twentieth century, and gained momentum in the 1960s with the development of hypermarkets and the shopping malls that typically surrounded them.

Franchising is a great business opportunity for people interested in investing or working on their own. And above all, the government of France recognises this sector as a potential source of development and employment. Franchising is actually booming in France and plays a vital role in the French industry for large, medium and small-sized companies. More than half of all French franchises are small to medium-sized companies.

Going further back to the early stages, the first franchising network of France came into being around 1911. The franchising history of France tells us about Jean Prouvost, owner of a wool mill in the Roubaix, who charged one of his employers with a responsibility to create a chain of wool shops. The employer created a sort of partnership between the wool mill owner and many traders, with an agreement to warrant them the patent of the brand. The brand was the famous "Laines du Pingouin" (Penguin Wools)! It is because of this event that the US and France vie with each other for the primacy of "franchising mother-country".

Franchising review

France is the European leader for franchising with more than 750 commercial brands, and business opportunities developing themselves through franchising; there are over 36,000 franchisees that engender a turnover of $33 billion euros. Franchises represent nearly 7 per cent of French trade. More than half of all French franchises are small to medium-sized companies.

When non-French franchisors are included, the number of franchises rises to 835. France brings together under one roof experienced management professionals who are dedicated to providing franchise business services to both French and international franchisors and franchisees. Franchising in France has always been strong in retail: this includes shoes and clothing franchising (a stronghold of French trade and taste) furniture toys and games, gifts, cosmetics, hair salons and luxury foods. Services, however, have seen a higher level of growth since the 1990s. The growth of the various sectors in the service industry 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. Recent legislation has also encouraged franchises in the service sector, giving an additional impetus to the franchising industry. Most recently, a third category of franchising has emerged: industrial franchising, which involves technology transfers, industrial licensing and engineering. Industrial franchising is particularly orientated towards export markets.

The most striking feature about franchising in France is that only a few non-French players are present in the market, ie, 10 per cent. On the other hand, one-third of the French franchisors claim at least 1 franchise outside France. Non-French franchisees are mostly present in clothes retailing and in fast food, many of which 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.

Automotive franchising grows by leaps and bounds

The automobile sector is a prime example of the increase in franchises in France. There are three main business activities in the automotive sector: rental, repair, and other services. Of the three, automotive rental franchises have grown the most. However, all three are considered to have significant growth potential. Overall, the number of franchises within each of the three activities continues to expand with all three seeking more entrepreneurs. Though the automotive sector has expanded to a great extent, there is still much more room for growth, and thus has a promising future.

Franchise Laws

Most countries do not have specific franchising laws, however there are broad laws that apply to franchising just as to other forms of networks. These are the laws regarding competition, brand name rights, employment, commercial leasing, etc. A French Franchise Code of Professional Ethics was established in 1972 and later laid the foundation for the European Franchise Code of Ethics, which operates in most EU countries today and serves particularly as a reference for jurisprudence.

In 1990, the Loi Doubin was implemented in France to safeguard the interests of franchisees by insisting on transparency on part of the franchisor. This helped boost the market further as it set clearer definitions. This law does not only regulate franchising but also controls the pre-contractual relations. It aims at assisting potential franchisees to gain knowledge and information considered essential for them with regard to investing in a franchise. The European exemption regulation designed by the European Commission is occupying an increasingly large space in the law and is gradually becoming the most important text to regulate franchising in EC countries.

French Franchise Federation (FFF)

The purpose of the French Franchise Federation (FFF) is to "represent, promote and defend franchising". The franchising code of practice drawn up by FFF in 1972 has become the European Franchising Code of Practice, which came into force on 1 January 1991.

French Franchise Federation runs training, awareness and information-sharing programmes for franchisors and franchisees. It communicates with the world franchising bodies on an ongoing basis and encourages and assists the French franchising industry in its efforts towards exports. It also seeks to develop every aspect of franchising (marketing, legal, economic) and it works with universities, research centres and think-tanks to achieve this. The website of FFF is: www.franchise-fff.com

Summing up

Franchising has a well-developed and ever-growing market in France, and anyone can enjoy a good business here, but with the right local partner and local knowledge.. Foreign franchisors account for about 10 per cent of the French market, while one-third of the French franchisors have at least one outlet abroad.

France is the second-richest country in terms of franchise business in Europe (Germany stands as the number one). French franchising represents 40 per cent of European franchising. Franchising in the country provides a model with regard to legislation and ethics, encourages growth, and helps reduce unemployment. For these reasons, it is continuing to develop and is now an integral part of the economic, commercial, consumer and urban fabric of the country.

Compiled by Jyotsna Jalali

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