UNH study: EU ripe for franchise growth

New research by the William Rosenberg International Center of Franchising at the University of New Hampshire indicates franchisors worldwide, and particularly those in the United States, are poised to take advantage of the increasingly dynamic European Union market.

The new report, “International Franchising: The European Union,” was presented recently at the International Franchise Association 46th Annual Convention by Udo Schlentrich, professor of franchising hospitality management, and director of the Rosenberg Center at UNH’s Whittemore School of Business and Economics.

“Although U.S.-based franchisors have been operating in EU countries for many years, entry and expansion into the newly enlarged EU market does not come without risk. The experience of U.S.-based franchise companies that have operated their system in the EU provides valuable lessons for potential entrants and also for those companies interested in expanding into the recently enlarged European franchising marketplace,” Schlentrich said.

The UNH researchers surveyed 109 U.S.-based franchise companies, representing more than 115,000 units worldwide. More than half of the U.S.-based franchise companies (52 percent) surveyed operate units outside the United States,– nearly a 20 percent increase in international expansion of U.S.-based franchise systems since 1996, and a 53 percent increase since 1989.

Those surveyed appear poised for expansion. Nearly four out of five franchise companies (79 percent) plan to open new units outside the United States in the next three years, which represents about a 25 percent increase since 1996, and nearly a 70 percent increase since 1989. The most important countries/regions identified for franchise expansion during the next three years were the United States (28 percent), followed closely by Canada (26 percent), Europe (15 percent), the Pacific Rim (9 percent) and China (7 percent).

Nearly one third (31.3 percent) of the franchisors surveyed felt that their future potential in the EU was outstanding, almost half (48.4 percent) felt it was moderate, and 20.3 percent felt it was limited.

“The assessment of franchising in the EU is timely, particularly in light of the potential opportunities presented by the enlargement of the EU with 10 new member countries. Two additional countries, Romania and Bulgaria, are close to being given the right to join the EU, while Turkey and the Ukraine are actively pursuing their application. The EU has an active franchising record, with hundreds of franchisors and thousands of franchisees operating throughout Europe, generating billions in annual sales,” according to the report. – NHBR STAFF