Global Franchise 9.3

12 GLOBAL FRANCHISE Issue 9.3 Emerging trends in European franchising and what they mean for franchisors globally Katalin Mandel SIX IDE AS. atalinMandel is a trailblazer in the franchise industry, serving as CEO of the Hungarian Franchise Association for over 15 years, as well as an active member of theWorld Franchise Council and a leading figure in Europe’s franchise sector. With extensive experience in leadership and strategic growth, she has helped to guide numerous brands to global success and co-authored several books. A passionate advocate for entrepreneurship, Katalin’s work continues to inspire innovation and empower franchise leaders around the world. K MICRO FRANCHISES A noticeable trend in the European region is the expansion of small- scale business concepts with low investment costs. These micro franchises are particularly popular in the Eastern European region and in smaller countries – e.g. Croatia and Hungary – but for these same reasons would prove successful in the Asian region and South America as well. The low investment means most brands in this category are expected to come from sectors without fixed locations, such as education concepts and services without high-cost tools (e.g. painting). The key here is a decrease in disposable income and the generally shrinking trend for the middle class. Both of these factors would price out aspiring entrepreneurs from the market but enable brands with low-cost investments to thrive. RECLAIMING THE EAST Since the pre-2000s, international growth in regions like Europe has slowed significantly and, in some cases, even reversed. As markets got saturated, market penetration became harder, especially in less developed countries where the costs of a Western franchise could not be justified by the local purchasing power. However, I believe COVID made a significant impact – and created a hole in the market for international brands to finally find their foothold in new regions. Iconic American brand Taco Bell has just started its growth in new European countries and Wendy’s has announced plans to open its first branches in the region. I believe we are going to see more restaurant brands, particularly leading U.S. franchises with high resources, capitalize on the vacuum left by the pandemic. In general, I think it would be wise for franchisors to consider less developed countries, as these provide the easiest opportunity for growth as they catch up with the standards of Western markets.. EDUCATION OPPORTUNITIES Like dining, education was thought of as a saturated sector, but we expect to see explosive growth in both the number of brands and in diversity, especially. The trend is fueled by the declining quality of education in most countries, and the significant drop in PISA test scores in OECD countries over the years, especially since 2020. The increasing complexity, mixed with distractions through social media, makes parents fear for the future of their children and look for opportunities beyond state-funded schools. This is supported by the growth of low- cost micro franchises, since most education concepts require upfront investment or fixed locations. RETURN OF EXPO MARKETING Despite the dominance of online marketing in franchisee recruitment I think we will see the return of live events in the coming years. In Hungary last year, we held the first expo since the disruption of the pandemic and saw great interest. This is also the experience in other markets around Europe, such as the leading events in Paris, Frankfurt, Warsaw and now Budapest. Since the restart of live events, we still have most of the growth ahead of us and I expect to see a re-balancing of marketing budgets away from online marketing and back to live meetings. We helped several brands find new partners this year and particularly found the expo to be a good tool for this recruitment. I hope I can use this expertise to help the growth of more international brands in Hungary.