Franchising: the new start-up?

29 April 2022

Since 1993, the number of franchises in France has grown steadily. Three decades of growth that both inspire admiration and raise a few questions… What are the reasons for such success? Are franchisees real entrepreneurs? What’s the difference with a start-up?

Did you know that France has nearly 80,000 franchisees working for more than 2,000 different brands?

These figures have almost doubled in 10 years, making France the most franchised country in Europe and the third most in the world. Despite this boom, franchising is still too often reduced to a kind ofrisk-free opportunism. Unlike a start-up, which is more akin to taking real bold initiative.

It’s precisely these two models that we’ll be comparing in this article. In practice, becoming a franchisee means deciding to install a concept that already exists elsewhere in a desired territory.

Let’s take an example. You stumbled across a small boutique of interior decorators during a weekend in sunny Aix-en-Provence. Totally in love with the products on offer, you thought the concept would be a big hit in a city like Lyon. After winning over the store’s management, you open a franchised store in Lyon, which you manage.

So, of course, you find yourself “under the umbrella” of a parent company that you are not a founder of, and which will be there to support and accompany you if need be. But all the risk capital and credit for having had the flair to set up this structure between the Rhône and Saône rivers goes directly to you.

Where a start-up is a leap into the unknown, a franchise offers the thrill of entrepreneurship with the security of a proven business model and a partially built market. It’s only a short step from thinking that franchisees are not fully-fledged entrepreneurs, a step that some people mistakenly decide to take.

In practice, the parent company simply makes its product available to the franchisee, who creates a business in which he or she decides to place his or her trust in a single partner. In short, the franchisee is no more than an entrepreneur who has put all his or her marbles in the bag of a single supplier.

And to convince the latter, the entrepreneur must of course prove the balance of his project and its potential profitability. Decision-making, business planning and day-to-day management: what do you call it? With us, he’s a company director, nothing more, nothing less.

Take a healthy dose of responsibility, add a pinch of risk and sprinkle in an investment to make the perfect cocktail. So yes, it’s necessary to get out the wallet for the initial investment. You need to invest more than €100,000 for 42% of franchisees and less than €50,000 for 33%, according to a CSA survey conducted in 2018 for the French Franchise Federation and Banque Populaire. This compares with around 400 euros for the launch of a paperless business.

But the franchisee then frees himself from the exorbitant product or service design costs that start-ups have to contend with. In this sense, franchising represents a derisory cost compared with setting up a more traditional business.

Another undeniable advantage of franchising: speed. Because it benefits from a reputation that is often already established, an existing image and know-how, a franchised business can be profitable right from the start. Start-ups often require months of patience, stress and uncertainty. So if growing a start-up is one of the most glorious feelings in the world, so is the success of a franchise.

If you had any doubts about the immense potential of franchising, don’t let them put you off.

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