Is your Franchise Fit for France?
If you are a franchisor and you wish to develop your business in France, there are a few important aspects you should be aware of. The latest figures from the French Franchise Federation (FFF) state that there were 2,049 franchise brands and 78,218 franchisees (franchise units) in France in 2019. The total revenue was €67,80 billion. The country has the highest number of franchise brands in Europe:
- at the end of 2018, the bfa (British Franchise Association) counted 935 franchises in the UK
- 960 franchises in Germany according to the Deutscher Franchiseverband
- 1,381 franchises in Spain according to the Asociación española de franquiciadores
- 980 franchises in Italy according to the Associazione italiana franchising
In terms of economic development, France will be one of the 10 most attractive countries in the world during the next 3 years*
Among the most attractive countries for foreign investments in Europe, France was in second place after the United Kingdom but before Germany in 2018 (source: EY France Attractiveness Survey, 2019).
"France houses the sixth largest economy in the world with a very developed securities market. In contrast to some emerging and frontier markets, this usually means less geopolitical risk and volatility. The country holds nearly 40 of the world’s 500 largest corporations. Larger companies typically have lower volatility and more predictable long-term earnings power. In fact, [they are] some of the largest insurance, airline, cosmetic, luxury, and energy companies. These attributes make it one of the most attractive investment destinations in the world for international investors, particularly in Europe. Those looking to invest in France have several different options, ranging from exchange-traded funds (ETFs) to American Depository Receipts (ADRs)." – Justin Kuepper, The Balance, 21st August 2020.
The quality of labour and the size of the French market are the main arguments given by foreign investors who choose this country to establish their business in Europe. Culture, location and quality of life are also important assets.
The AmCham’s (American Chamber of Commerce in France) analysis draws the same conclusion: France’s assets for foreign investors are the quality of labour, geographical location, high R&D level, infrastructure and the economic situation.
"Over 40% of American investors predict a favourable evolution of the economic situation in the next three years, which is nearly 10 additional points over 2018. There is less economic uncertainty and more positivity due to the French government’s reforms which leads to more optimism.
Around two thirds of American investors value France as "attractive" or "very attractive" in Europe. The country’s attractiveness became stronger in 2019, despite social unrest. On top of its traditional strengths (qualified labour, good geographical location, …), France benefits from circumstantial impacts with Brexit on the one hand and the economic slowdown in Germany on the other hand. Over 85% of American investors think the reforms of the French government make the country even more attractive: pro-business speech, number of reforms carried out and the first effects of simplifying measures like the Pacte bill (loi Pacte). The American investors’ optimism is substantiated through the investment amounts announced during the Choose France summit in January 2020: Coca-Cola and CCEP announced that they’re investing up to €1 billion in France. FedEx announced a new €30 million investment in France over 2020-2022, of which €20 million for their European platform in Roissy [close to the Charles-de-Gaulle airport]."
Business France is an organisation that supplies a lot of data and regulatory texts in English to foreign investors who want to develop their business on French soil.
One Out of Twelve Franchises Is of Foreign Origin in France
According to the 16th survey by the FFF in 2019, 8% of franchise brands were from another country (-2% compared to 2011); in contrast, 40% of French franchisors have established their brand abroad with the biggest names better developing in foreign countries.
American franchises are the main foreign franchises established in France and food is the biggest industry. Thus, it is not surprising to find McDonald’s in the first place with 1,484 units in Franchise Directe’s Top 100 – ranking the 100 most prominent franchises in France. The second American franchise in the list is Century 21, a real estate franchise with over 900 agencies in the country, ranking in the 5th spot after three French monsters – Carrefour, Darty and Yves Rocher. Other foreign franchises at the top of the ranking are:
- ERA real estate - USA - 6th
- Domino’s Pizza - USA - 8th
- SPAR - Netherlands - 9th
- Burger King - USA - 10th
- Leonidas - Belgium - 20th
Legally speaking, it’s interesting to note that there is no definition for franchising in French law. The French Franchise Federation uses the definition of the European Franchise Code of Ethics, which French courts use as a guide. Franchise agreements aren’t codified in French law and there is no government organisation specially dedicated to regulations regarding the buying and selling of franchises. However, the General Directorate for Competition Policy, Consumer Affairs and Fraud Control (DGCCRF), an administrative body within the Ministry of Economy and Finance on the one hand and the Competition Council, an independent authority on the other hand, are in charge of the aspects of the competition law concerning distribution and selling and this includes franchising.
The most famous law regarding franchising in France is the Doubin Law, which compels the franchisor "to provide to the other party a disclosure document giving truthful information allowing the buyer/franchisee to commit to the contract with full knowledge of the facts."
This information will be listed on the Document d'Informations Précontractuelles (DIP - Pre-contractual Information Document) that the future franchisee will receive at least twenty days before signing the contract.
Outside French franchising regulations, there are several important aspects to consider before entering the French market. "A few structural obstacles to the attractiveness of France are still there even though the European situation – with Brexit, economic slowdown in Germany and political instability in Italy – strengthens France’s position as an attractive investment place. Tax competition, flexibility and cost of labour in France remain as some of the main obstacles to American investment. Social conflicts as well as the cost of living in Paris are also taken into account. However, the other French regions offer substantial assets that can attract foreign investors and are widely untapped." – Stéphanie Barreau, 3M France President, AmCham France President and Marc-André Kamel, Director and Associate at Bain & Company, AmCham France VP.
One of the yearly events that allows people to meet and interact with experts regarding franchising in France is the international trade show Franchise Expo Paris which usually takes place in Paris, Porte de Versailles. Franchise Directe is an exhibitor at the the show every year.
*Source: Kantar Public, A.T. Kearney, Altares, May 2019