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Franchising major part of the German economy

The franchising of business concepts is more than just a relatively simple way to help companies grow rapidly within their home country; it is also an ideal tool for tapping foreign markets with established, successful systems.

The German franchising industry is also benefiting from this development. It has been growing more rapidly than the overall economy for years. The sector recorded gains of around five percent in 2022.

Germany’s large population and steadily growing purchasing power make it particularly attractive for foreign investors who primarily have their roots in the service industry. Moreover, the German government views franchising as an engine that drives the establishment of businesses and livelihoods in Germany – a cause that it fully supports.

The Industry in Numbers

  • Turnover generated by the German franchising industry grew by 4.6% in 2022 to EUR 142.2 billion.

  • In 2022, there were 930 franchise concepts active in the German market.

  • More than 144,000 independent franchisees employed over 800,000 people in 2022.

  • In 2022, 52% of franchise systems in Germany were in the service sector followed by the retail sector (22%), and food service, tourism & leisure (20%) . Skilled trades, construction and maintenance reached a share of 6%.

The German Franchise Industry by Sector 2022

German Franchising Industry Turnover 2022

Market Opportunities

  • The number of franchising systems operating in Germany is still relatively low compared to other countries like the UK or France.
  • The fields of home services (including in-home care and nursing), education/ training, skilled trades, and health care offer above-average opportunities for growth.
  • Only 21 percent of all systems in Germany come from overseas.
  • The majority of the franchising concepts active in Germany have less than 50 partner companies and are often not represented throughout the country.
  • Around three-quarters of the German labor force has vocational training or a university degree. This allows franchisees and franchisors alike to find highly qualified personnel at all times.

Market Entry

The preparation for and execution of market entry in Germany can generally be broken down into the following phases:

  • Market analysis

  • Personal visit

  • Clarification of legal and tax conditions

  • Development of a business plan

  • Translation/drawing up of necessary documents such as the franchising contract, handbook, promotional materials

  • Search for partner companies, followed by negotiations

  • Setting up one or more pilot companies autonomously or in cooperation with a German partner

  • Expansion, such as through development agencies or master franchisors

Keys to Success

There are a number of possible approaches to successfully establishing a foreign franchising system in Germany, depending on the products or services offered and the franchisor’s business strategy.

When implementing a new franchise concept, a decisive factor for success is for the franchisor (alone or in cooperation with a German partner) to set up one or more pilot companies, regardless of whether market entry/expansion is carried out by a development agency or a master franchisor. This makes it possible for franchisors to adapt their concepts to the German market while simultaneously looking out for additional potential franchisees.

Successful pilot companies are more than just the best possible advertising for interested franchisees; they are also an important tool for setting the right prices, which form the basis for long-term, shared success in the German market for both franchisors and franchisees.

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