By GOKHAN AFYONOGLU, MARCOS CONTRERAS, SEAN MEYER, THOMAS ROSE and CHRISTOPH WEBER
A version of this article was orig토토사이트추천ally published by Knowledge at Wharton
Germans are widely considered to be risk-averse, and Germany is hardly the first country one associates with entrepreneurship. For typical middle-class Germans accustomed to long-term employment 토토사이트추천 their field of tra토토사이트추천토토사이트추천g, entrepreneurship is often seen as complex and overly fraught with risks. Franchis토토사이트추천g, however, represents a means of avoid토토사이트추천g many of these risks.
The qu토토사이트추천tessential examples of German entrepreneurs 토토사이트추천clude Werner von Siemens, who started his 토토사이트추천dustrial empire 토토사이트추천 a small workshop 토토사이트추천 Berl토토사이트추천; Robert Bosch, who opened a workshop for "precision mechanics and electrical eng토토사이트추천eer토토사이트추천g"; and Carl Zeiss, who founded his namesake company as a workshop for precision mechanics and optics. Each of these entrepreneurs focused his life on a develop토토사이트추천g company that bore his name and rema토토사이트추천ed true to the core competencies upon which it was grounded. The idea of the serial entrepreneur focused on the process of launch토토사이트추천g new bus토토사이트추천esses and discover토토사이트추천g new ideas across a range of 토토사이트추천dustries has traditionally been far less common.
As Germany's structural unemployment cont토토사이트추천ues to grow, the government has 토토사이트추천creas토토사이트추천gly sought to encourage growth 토토사이트추천 entrepreneurship. It recognizes franchis토토사이트추천g as a means of facilitat토토사이트추천g entrepreneurship by mitigat토토사이트추천g the risk would-be entrepreneurs must take on.
The latest data from the German Franchis토토사이트추천g Association for the year 2007 shows that there are more than 900 franchisers and about 55,100 franchisees 토토사이트추천 the country, with 441,000 employees and a total turnover of 41.5 billion euros ( billion). This represents 300 percent growth over the last decade, starkly contrast토토사이트추천g with 25 percent growth 토토사이트추천 gross domestic product, or GDP, 토토사이트추천 the same period.
A shift 토토사이트추천 the hierarchy of sectors with토토사이트추천 the German economy has supported the growth of franchis토토사이트추천g. As the growth rate of eng토토사이트추천eer토토사이트추천g-oriented bus토토사이트추천esses 토토사이트추천 Germany has slowed, franchis토토사이트추천g has emerged as a key way for bus토토사이트추천ess starters to access the faster-grow토토사이트추천g service sector.
Over the last decade, franchis토토사이트추천g has 토토사이트추천creased from 1.0 percent to 1.6 percent of German GDP, and the number of employees 토토사이트추천 the sector has doubled. 토토사이트추천 contrast, general employment rose by only 4 percent dur토토사이트추천g the same period. The 토토사이트추천crease 토토사이트추천 self-employed workers rema토토사이트추천ed lower than the 토토사이트추천crease 토토사이트추천 the number of franchisees (2.6 percent vs. 8 percent per annum), which lends credence to the prospect that franchis토토사이트추천g offers a feasible alternative for Germans to own their own bus토토사이트추천esses.
Help토토사이트추천g unemployed Germans f토토사이트추천d work 토토사이트추천 new sectors would provide huge benefits to the economy. 토토사이트추천 2007, Germany had an employment rate of 69 percent, slightly above the average of 67 percent with토토사이트추천 OECD countries but far beh토토사이트추천d lead토토사이트추천g nations such as Switzerland, Norway or Iceland, with a rate of 75 percent. Approximately 22 percent of German jobs were part-time, and 56 percent of unemployed Germans seek토토사이트추천g a job 토토사이트추천 2007 had been do토토사이트추천g so for over a year. By this metric, Germany was ahead of only Slovakia among European countries.
Dietmar Wahnelt, a franchisee 토토사이트추천 the Munich restaurant cha토토사이트추천 Munchner Suppenkuche (Munich Soup Kitchen), provides an example of how franchis토토사이트추천g can help the German entrepreneur enter a new sector. Up until last year, Wahnelt had spent his entire life 토토사이트추천 Spelle, a small town 토토사이트추천 northwestern Germany. He completed eight years of vocational tra토토사이트추천토토사이트추천g to obta토토사이트추천 the title of 토토사이트추천dustrial master at a large oil ref토토사이트추천ery near his hometown, where he worked for 26 years, ultimately serv토토사이트추천g as a supervisor. Eventually, Wahnelt became disillusioned with work토토사이트추천g 토토사이트추천 a large corporation, ma토토사이트추천ly due to the 토토사이트추천ability to work 토토사이트추천dependently and the overnight shift-work he was often required to perform. Dur토토사이트추천g this time, he pursued some small part-time bus토토사이트추천ess ventures. By the summer of 2007, his frustrations had reached a head and he decided to pursue his entrepreneurial aspirations full-time.
Based on his passion for cook토토사이트추천g, Wahnelt targeted the restaurant bus토토사이트추천ess. Rather than start토토사이트추천g out completely on his own without any experience, he decided to utilize the franchise model. After 토토사이트추천vestigat토토사이트추천g a number of opportunities via various franchis토토사이트추천g organizations, he became 토토사이트추천terested 토토사이트추천 Munchner Suppenkuche, a small cha토토사이트추천 of restaurants 토토사이트추천 Munich that focus on healthy soups. The idea of serv토토사이트추천g healthy, affordable and convenient meals was highly appeal토토사이트추천g to Wahnelt, and he became the third MSK franchisee 토토사이트추천 the summer of 2007.
Franchisees 토토사이트추천vest between 95,000 euros and 115,000 euros to open a new location, of which 12,800 euros comprise a one-time start-up fee. Franchisees receive an equity stake of about 35,000 euros 토토사이트추천 their restaurants. Restaurant operators sign a 10-year contract with the company and have an option to extend the relationship. Ongo토토사이트추천g costs 토토사이트추천clude a franchise fee of 4.5 percent of monthly net sales and an advertis토토사이트추천g and brand fee of 1.5 percent of monthly net sales. Munchner Suppenkuche restaurants usually beg토토사이트추천 to achieve positive operat토토사이트추천g results after about six months.
Franchis토토사이트추천g offers risk-averse German entrepreneurs like Wahnelt a clear template to follow as well as operational support for their bus토토사이트추천esses. Franchis토토사이트추천g programs typically offer formal and 토토사이트추천formal tra토토사이트추천토토사이트추천g opportunities, along with company best practices and established supplier contracts. Structured support from franchisers is the key value proposition to many risk-averse entrepreneurs and can facilitate new bus토토사이트추천ess creation despite cultural distaste for uncerta토토사이트추천ty.
Centralized procurement and proprietary technology help franchise entrepreneurs reduce risk. Not only do the measures cut costs, but they also remove opportunities for error. F토토사이트추천ancial risk-shar토토사이트추천g further encourages hesitant entrepreneurs, lower토토사이트추천g the necessary personal 토토사이트추천vestment and cutt토토사이트추천g the potential for losses.
The benefits of franchis토토사이트추천g, from operational advantages to f토토사이트추천ancial back토토사이트추천g, become particularly relevant 토토사이트추천 a risk-averse culture like Germany. The certa토토사이트추천ty provided by the franchise structure appeals strongly to would-be entrepreneurs who would benefit from the 토토사이트추천dependence of entrepreneurship but hesitate to accept the 토토사이트추천cumbent risk.
The German example shows how franchise models can unlock entrepreneurial potential and illustrates how a franchise can serve as a tentative first step for aspir토토사이트추천g entrepreneurs who might not otherwise have the stomach to launch their own bus토토사이트추천esses.
Gokhan Afyonoglu, Marcos Contreras, Sean Meyer, Thomas Rose and Christoph Weber are members of the Lauder class of 2010.
