Set Up a Franchise Business in Germany
Set Up a Franchise Business in GermanyUpdated on Friday 14th April 2023
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In a franchise relationship, the franchisor grants the franchisee the know-how, intellectual property, and business model to sell branded products and/or services. This business expansion model is generally perceived as an advantageous one for both parties. Some of the largest franchised chains in the world include fast food companies as well as convenience stores, mid-priced hotels or hair salons, among others.
Our team of franchising lawyers in Germany are ready to assist investors who are willing to enter into a franchising agreement. One of our attorneys will be able to provide complete information on the laws and regulations that govern this business relationship as well as provide counseling for the purpose of drawing up or reviewing the agreement.
The advantages of a franchise in Germany
In a franchise business, the party acquiring the business model gains the right to open a company in another location that will function based on an already tested and successful model. The assistance and guidance offered by the franchisor are in exchange for periodic fees, as agreed upon.
Some of the most important advantages of buying a franchise include the following:
- No needed experience: when purchasing a franchise, there is no mandatory need for prior business experience.
- Training: the franchisor will provide the training needed to implement their tested business model.
- Success rate: a franchise model will generally have a higher success rate compared to a new business as the services are already tested on other markets.
- Reputation: liked to the success rate, the foreign franchise will already have an established reputation and image, allowing for easy market development and gaining clients.
- Costs: in some cases, investors may find that purchasing a franchise will involve fewer costs compared to starting a similar business from zero.
One of our attorneys in Germany can provide more details about these advantages as well as some of the issues investors should be well aware of, such as liabilities and the fact that business growth will be dictated by the franchisor, hindering the creative business development process of the franchisee.
Investors should carefully weigh in these advantages and issues compared to those related to starting a business in Germany. Moreover, when they decide to open a business in a specific business field, they should find suitable franchising opportunities and, if they do not exist, consider starting their own business. The experts at our law firm in Germany can also provide assistance for those who are willing to open a new company.
Opportunities for setting up a franchise in Germany
Investors have several possibilities when they decide to open a company in Germany and, as previously stated, this also includes entering into a franchise as opposed to opening a new business with a separate business plan.
Some of the franchising opportunities in Germany include the following ones:
- Education centers: a franchise for an education center that offers multiple types of courses for people of all ages.
- Coffee shops: this can include a traditional coffee shop or a mobile one; becoming an entrepreneur with this type of business is common.
- Food and drink: opening a franchise for selling food and beverages is also a lucrative option; ideas can include fast-food chains, smoothie shops, and others.
- Beauty: entering a franchise is also possible in the beauty industry by opening a spa or treatment center as well as a hair and nail salon.
These are just four ideas that investors can explore and look for available franchises for purchase. Other business fields in which entrepreneurs may find franchising opportunities include travel and leisure, fitness, health, cleaning, and home services. The minimum investment required will depend on the chosen business field. For example, a coffee business can require a minimum investment of 60 to 75,000 euros, depending on the franchisor.
The new company will be subject to VAT registration in Germany, as well as the obligations for tax filing and payment that derive from this registration. Companies are generally subject to quarterly preliminary VAT returns, however, in some cases (depending on their tax for the previous calendar year) that can also be asked to file monthly preliminary returns. Our team can give you details.
According to statistical data, the German franchise industry is defined by the following numbers:
- number of franchises in 2018: 128,009;
- number of employees: 715,362;
- number of total businesses: 167,961;
- annual turnover in 2018: 122,8 billion euros.
Investors should know that the umbrella organization for the local franchise sector in the country is the German Franchise Association.
One of the most important elements in the case of franchising is the franchise agreement signed between the two parties. Investors can read this article about the contract presented by our lawyers in Germany and can reach out to our specialists if they have any questions.
Contact our law firm in Germany for complete information on starting a franchise or another type of business in the country.