Country report
28.05.2009
Finding franchisees has nothing to do with a summer sale
An interview with Torben L. Brodersen, managing director of the DFV,
about the DFV’s annual general meeting and the discount campaigns currently
being carried out within the franchising sector.
“Staying strong
in times of change” – This was the title of this year’s annual general meeting
of the German Franchise Association (DFV). A number of aspects were looked at in
detail including the risks, opportunities and trends for franchise businesses in
the current economic downturn. According to Torben L. Brodersen, managing
director of the DFV, not all of the recent developments have been positive. An
interview about this year’s annual general meeting, serious advertising measures
and the special offers currently being used to attract new franchisees.
FranchisePORTAL: The German franchise economy met up at the annual general meeting which was held in Leipzig this year on 27 and 28 May. What were the main subjects being discussed this year?
Torben L. Brodersen: The title of the event says it all – we looked at the changes currently taking place: on the one hand, the effects of the economic and financial crisis which the economy as a whole is having to face. Faced with such problems, franchising – with its special kind of cooperation model – can actually be a stabilizing factor. On the other hand, the franchise sector is itself undergoing changes. Faced with the current crisis, customers are changing their priorities and companies are being forced to adapt to these changes. According to the latest forecasts, greater value will be put on aspects such as honesty and credibility and profit maximization or innovation will be pushed into the background. Various talks being held at the meeting pointed out what franchise systems should undertake to achieve sustainable success – subjects such as franchisee satisfaction as well as dealing with the difficulties or changes caused by acquisition and selling via the Internet.
FranchisePORTAL: Some franchise prizes were also awarded during the event.
Torben L. Brodersen: That’s right. The magazine, Impulse, presented its Franchisor and Franchisee of the Year Awards. The prizes were presented during the DFV forum as this is the time when the majority of the representatives are present. Furthermore, “Franny” awards were presented for the first time this year – these are awarded by franchisors to their franchisees who have been particularly successful. Eight companies used this opportunity and a total of 20 franchisees were given the award.
FranchisePORTAL: The DFV recently published some figures that demonstrated the positive development of the franchise branch last year. How do you see 2009 developing – has the economic downturn had an effect on the franchise sector, too?
Torben L. Brodersen: We don’t yet have any figures for 2009 but the downturn will certainly have a greater effect than it did in 2008. We are not expecting a dramatic collapse within the franchising sector but growth will certainly slow down. Franchising is found in all branches – some have been more badly affected by the downturn whilst others have been less affected or are even profiting from the current situation.
FranchisePORTAL: Some franchise systems are trying to push forward the sale of franchise licences by offering bonuses or even using EBay auctions. A foreign-based, German-speaking franchise website has already started advertising special discounts. What is your opinion of such discounts?
Torben L. Brodersen: Those people who have decided to run such bonus campaigns are, of course, trying to stand out from the crowd and attract attention. I believe such actions to be very problematic. Those who shout loudest obviously need to do so. Such actions make me suspicious for they must be having problems finding franchisees if they need to carry out such campaigns. Finding franchisees has nothing to do with a summer sale. They should not be looking for someone who is just on the look-out for a bargain but for suitable and qualified entrepreneurs who are able to turn a franchise concept into a successful business. Such campaigns merely give the impression that the most important thing is to squeeze as much as possible out of the franchisor.
FranchisePORTAL: Are the special advantages that franchisors are offering as an incentive to attract new franchisees not in conflict with the aim of franchising to create a genuine partnership – an aspect that is emphasized in the DFV’s Code of Ethics?
Torben L. Brodersen: Certainly, because a franchise partnership is very complex and far more than just the amount of the entry fee. Some of the bonus campaigns offered by franchise systems also include greater territorial protection or other advantages. These create a feeling of unrest among the franchisees. It is also unfair towards those franchisees who joined the system under the normal conditions. I believe that such marketing campaigns are just a hasty reaction and are not sustainable over the long term.
FranchisePORTAL: Now that one website has begun such campaigns this could lead to others doing the same to remain competitive. What effects could such price wars have on the German franchise sector as a whole?
Torben L. Brodersen: I believe it would be a catastrophe if the impression is given that franchise licences can be sold at a loss. This is a breach of taboo and serious, qualified entrepreneurs will certainly not endorse such measures. Such campaigns will damage the overall image of the franchise branch.
FranchisePORTAL: What, do you believe, are the general boundaries of serious advertising to attract new franchisees?
Torben L. Brodersen: What is very important is to have a good concept and to present it in a detailed and honest manner. This is what is important when choosing a franchise system and not how much it costs to join. I believe that entrepreneurs feel the same when looking for a suitable franchisor. I have spoken to many potential franchisees and one of the things they often point out is how difficult it is to find neutral, meaningful information about franchises. I would, therefore, prefer the websites active in this sector to report about franchises in a more differentiated manner. Such reports should be fair but, if necessary, also be critical of the company they are covering. Franchiseportal is well on the way to achieving this.
FranchisePORTAL: Thank you very much for the
interview!
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