#13 - What are the main trends in franchising for 2022?

Transcript:

00:00:00

Gaëlle Helsmoortel: Hello and welcome to another episode of the Dgenious podcast, Let's Talk Retail. So today we're going to talk about franchising and more specifically, what are the big trends in franchising that we can expect in 2022 and maybe even this year already? Because usually, the big trends start early. So, there you go. And for that, for this discussion, I invited Didier Depreay today. Hello Didier. How are you doing?

00:00:31

Didier Depreay: I'm very well, thank you Gaëlle.

00:00:34

Gaëlle Helsmoortel: So, for those who don't know Didier Depreay, he's really the man of the franchise, at least, that's what I call him. Why? Because today Didier is the president of the European Franchise Federation. You are Didier at this position since 2018. You were previously for 15 years the president of the Belgian Franchise Federation. So, as I was saying, a franchise man, you will be as convinced as I am now. And on top of that, Didier has a bakery chain called Point Chaud, of which he is the founder, and the CEO, of Points Chaud, in Belgium. So, that's it for the tour, the identity card. I would say of course Didier, if you wish to complete or modify things that I have said and that do not seem to you to be totally accurate. You can do so, and I'll ask you the first one directly. The first question, so we're going to talk about franchising, but if we analyze the franchise market today, let's say in Belgium and France, because our listeners are mainly in Belgium and France, how would you describe this market today? What is the franchise market here? Is it an evolving market or not? Are there... how many franchises, how many franchisees? So, there you go. Could you first give us an overview of the franchise market here?

00:02:16

Didier Depreay: Yes, franchising has been a growing success in Belgium and in France for many years. In Belgium, there are more than 200 franchise networks as defined by the Belgian Franchise Federation. Because obviously, not everyone is talking about the same thing. Franchising must be defined in a precise way, and I think that the only possible reference to define it and to understand its scope, its field of action, is that of the Belgian Federation of Franchising and, obviously, the one that is taken up by the European Code of Ethics, Franchising that the European Federation has written. The total number of franchisees is about 6,000. We will know more soon because the Belgian Franchise Federation is conducting a quantitative study on the market. It should be finished in the next few weeks, and I think we will be able to announce some results at the end of October, so we will have more precise figures soon, but according to the last estimates that were made, about 6,000 franchisees and about 30,000 people are working in the franchise business in Belgium. So here we do not include the number of workers in the branches of mixed networks that also do franchising. Very often, a network that develops through franchises also develops through branches. Not always, but often. I think we're not far from 10% of the total retail turnover as far as the Belgian market is concerned.

00:04:11

Gaëlle Helsmoortel: Yes, so that's a pretty good representation already?

00:04:14

Didier Depreay: Yes, yes, I think so, yes, yes, I think so. I think that indeed, this share of the global market is growing and should normally still have a dominant share in the coming years.

00:04:34

Gaëlle Helsmoortel: You were talking at the beginning about the official definition of what a franchise is. Can you maybe tell us more about what that definition is?

00:04:45

Didier Depreay: So, we might have to go over all the legal basics and I'm not sure we need to go into that detail today. But overall, it's a commercial collaboration agreement based on a certain number of principles. I think that what distinguishes franchising from other types of commercial partnerships, and to understand this quickly and briefly, is the transmission of know-how, which is essential. And so, all the networks that develop through franchising have developed a model and an academy within them to be able to progressively integrate franchise candidates, give them initial training and ensure ongoing training, while also setting up permanent technical and commercial assistance. So, franchising is a great way for many people to retrain. I don't think there are many associate business models that can match that kind of thing because obviously the cornerstone is that, it is the transmission of know-how, which is not easy.

00:06:01

Gaëlle Helsmoortel: So obviously, it's not easy, but it's a great mission, I think for the franchise where today there are many people who are looking for more knowledge. There is a lot of authenticity and transparency. But I think that passing on know-how, having this continuous training, this constant support, these are great values that are in this type of business collaboration. But I really have the impression that we are seeing more and more of this, that it is echoed more and more in... I have a good number of people, so I had the feeling that it was constantly evolving. Are there a lot of new franchises coming into our market, maybe in new areas where there wasn't this type of business collaboration before, but are now franchising, I don't know if you can say that? Or is that a complement?

00:07:09

Didier Depreay: We'll say franchising.

00:07:12

Gaëlle Helsmoortel: Yes, franchising, franchising, it's a little bit complicated. So, are there new franchises coming into areas that were not before? Or maybe even existing sectors that are booming more than others? Is that something that you're seeing?

00:07:31

Didier Depreay: To answer this question, I think it is necessary to compare the development of franchising in Belgium with that of its direct neighbours. I think that Belgium, with its different regional governments and all the regional legislations, with its administrative millefeuille that all these governments create, offers conditions for setting up and developing franchises that are perhaps a little more difficult than elsewhere. But I think that all modes of collaboration taken together, this does not only concern franchising, but it is also for entrepreneurship. We should not multiply the regulations when we are in the same market. We are faced with several different regulations. This obviously poses a problem for the entrepreneur who wants to develop through franchising and who is aiming at a national market. So, I would like to say that all these administrative and legal difficulties have a negative impact on the development of franchising and do not allow it to hope for growth rates in Belgium as high as those of our neighbours. But fortunately, franchising remains such an efficient way to carry out a project that would be much more difficult for a candidate to implement alone. And so, franchising continues to progress despite all these difficulties.

00:08:59

Gaëlle Helsmoortel: Yes, so there are perhaps fewer new sectors in our country that aure franchising, but perhaps more franchising...

00:09:08

Didier Depreay: So, I think it's the implementation that is perhaps a bit more complicated because all the sectors that we find in our neighbours are also developed in Belgium. I think it's fair to say that from food to personal equipment, real estate, construction, training, etc., all sectors are involved. All sectors are concerned. Generally speaking, we can say a priori that franchising applies to all fields and that almost everything can be franchised. In fact, the limit is the ability to transmit know-how and to manage the development of a network.

00:09:48

Gaëlle Helsmoortel: Yes, which is perhaps also transmitted. Maybe franchisors have in their academy a curriculum for maybe, just more managerial, or more for the management of a franchise network. Maybe some of them also have this to help or facilitate. Indeed, I understand that this is a potential brake for some.

00:10:14

Didier Depreay: Let's say that there is a lot of initial work. You have to develop a model at a certain point, which is the pilot. Franchising cannot be developed in a network or in any case, one cannot improvise oneself as a franchisor if one has not developed a model that is capable of demonstrating its sustainability and profitability. I think you can't attract a candidate to the franchise without having tested a know-how and without having developed a transmission method or methods.

00:10:49

Gaëlle Helsmoortel: Yes, absolutely. But do you see that this franchise business model or this type of business collaboration, is evolving? So, I guess it has already evolved in the last few years, but maybe not. Maybe the fundamentals that you're talking about, which are the transmission of training, the transmission of knowledge, the training, maybe that's still a common base. Or has it evolved? Or do you think it's still a type of business collaboration that will evolve in the future?

00:11:25

Didier Depreay: It's evolving. Yes, it has evolved, and it will evolve again. In Europe, we can see the differences between countries, or in any case, the big countries that have developed franchising for a long time, such as France, England and even Germany, have a more developed experience of franchising than smaller countries, especially in Eastern Europe. And so, in this respect, I think that the different legislations that have been put in place, such as those concerning the obligation of pre-contractual information, have allowed, at least as far as Belgium is concerned, to behave in a more virtuous way than before. And I think that we are moving towards, and I am convinced of this, a franchise culture that integrates much more virtuous values, much more ethical values than those that were practiced in the past. In any case, 20 or 30 years ago. We are working on this within the federations, and we require a certain number of values within the federations which are written in a charter that the members are obliged to respect. To make a long story short, it's a kind of label that we grant to brands that commit to respecting everything we have codified and that we intend to make the market respect.

00:13:09

Gaëlle Helsmoortel: Oh, that's good! It's not well known by the general public or am I wrong?

00:13:12

Didier Depreay: It's not well known. Yes, it's true that it hasn't been communicated enough yet, but it's a long process. I think franchising is not a very sexy topic. It's not talked about enough if you know what I mean?

00:13:30

Gaëlle Helsmoortel: Yes, so I think it's a really sexy subject. I want to say I think it's really... I mean, personally, I've been following it for a long time in the United States and I think it's really the biggest market for franchising. Maybe it's not the truth, maybe it's a feeling on my part. But I have always found this business model very, very attractive. And indeed, maybe easier than starting from scratch, but that we don't talk about it enough. Yes, we agree.

00:14:03

Didier Depreay: We don't talk about it enough. If we take the franchise in Europe, of all the countries that make up Europe today, the geographical Europe, we are far ahead of the United States, where you have to put together the United States, Canada, Australia and India to have more or less the European franchise market. So, Europe is far ahead of all the other markets, the big markets. Of course, including the American one.

00:14:40

Gaëlle Helsmoortel: Oh right, I had a feeling that was completely wrong, so, all the more to communicate about franchising and be proud of it because we always think that a lot of things come from the United States. So, I guess not, we have a lot of things that come from Europe, from home.

00:14:55

Didier Depreay: Of course. In fact, we can see that European brands have nothing to be ashamed of when it comes to the development of American brands. In the whole of Asia, there are as many European brands as there are American brands. Perhaps the Americans are developing a little faster because they probably have a little more money, as the market is more open in the United States. I think that when you are a New York franchisor, you can more easily access the entire American market than when you are a Brussels franchisor, you can access the European market and therefore companies that develop in a legislative system that is perhaps a little more open and flexible than the European one, they have more quickly, they develop more quickly financial capacities that allow them to consider exporting their concept and therefore test runs in new foreign markets where you always have to adjust your concept a little to adapt to the local market. And that's what European brands lack, especially Belgian brands. When you have covered the national market, you are still nobody. You're still nothing, you're still an SME, whereas when you've covered the American market, you're a very, very large company and you don't have the same capabilities.

00:16:23

Gaëlle Helsmoortel: No, actually, I think that's what it is. What you're saying is very logical and very coherent, it's that we have the possibility to go much faster in the United States. For all the reasons that you just explained, we still have a little bit of work to do in Europe, whether it's administrative or other.

00:16:40

Didier Depreay: Yes. Long live Europe! Long live Europe!

00:16:46

Gaëlle Helsmoortel: Oh well, I agree. We can go even further in the... at the commercial level. But you are working on that, I guess.

00:16:52

Didier Depreay: Yes, yes, of course.

00:16:54

Gaëlle Helsmoortel: At the level of federations?

00:16:56

Didier Depreay: Yes, of course. The European Federation is currently working on the renewal of the vertical exemption regulation that allows franchising to exist, because it is a vertical system based on a text that allows it to exist. Otherwise, we would not be able to, since it is total free competition. So, it is still a vertical agreement that Europe allows thanks to this regulation, and which will be renewed soon. We are waiting for the final texts at the beginning of next year and the European Federation has been working to find solutions to, in any case, proposed to the European Commission to change some positions to allow the network more facilities so that it understands that the exchange of information is very important between the franchisor and the franchisees.

00:18:01

Gaëlle Helsmoortel: Yes, perfect! So, you are fighting well for the development of franchises in Europe, and I will of course put in the bio of the podcast the different ways of connection for the federations. Because I think it's interesting for people who want to know how to connect with you, how to be a member because it's important. If we go back to trends now, do you see, or do you within the Federation, do you really see any trends emerging and going to emerge in the next few months?

00:18:42

Didier Depreay: I think I can say that due to the globalization of the economy, brands and franchises can be found across all continents. Initially, of course, it was North Americans such as McDonald's, Apple, Pizza Hut. And also, French brands, of course. Today, there are French, Belgian, Spanish, etc. brands. In China, Japan, Australia, such as Wuidar, Godiva, Léonidas, to mention the Belgian brands Brioche Dorée, the brands of the Accor hotel group such as Novotel, etc. These brands can be found just about everywhere. As I was saying earlier, any entrepreneur who has developed a concept, who has modeled it, who has tested a well-organized know-how, who wants to develop it and who has developed a method of transmitting his know-how will be able to do so, provided that he has the means to do so. And so, I think that today, new concepts are appearing in all fields. Areas such as training, childcare or even nurseries or training schools are now being developed under franchising with very, very nice concepts, with contents that are quite relevant and that we, the federation, are trying to capture to help them develop.

00:20:27

Gaëlle Helsmoortel: Okay, and what advice would you give today to entrepreneurs who want to create their own franchise and to franchise candidates? Because I imagine that you see both types of population, I would say, or people. There are people who say they want to be a franchisee, others, I guess, who say no, I would like to start a concept and start a franchise. What advice would you give them to take the plunge?

00:21:01

Didier Depreay: The first thing, the first piece of advice is related to the awareness of the candidate, of his personal abilities to engage as an independent. Because that's no mean feat. You have to be aware that it won't be the same as before, so it's especially for the salaried worker. It is less so for the person who is already self-employed in another field, but in any case, for the person who is employed, who wants to develop a project as a self-employed person and with a franchising partner, he or she must measure all the effects on his or her way of life. This is the first thing to do, I believe. First, because there will necessarily be a break in the candidate's life path if he has never been independent before. The second is the analysis of the characteristic clauses of the contract, its rights and obligations, as well as the evaluation of the franchisor's capacity to transmit its know-how and ensure continuous assistance. He must be able to evaluate this to ensure that he will be able to take on a new business. The third, I think, is the initial integration process. The franchise candidate has to look closely at how he is going to learn what he needs to learn. The basics that will be necessary to start his new business. Then, I think it is necessary to share the cultural values of the brand. And to analyze their material tradition in the life of the network to which the candidate wishes to join. Finally, even if it is not the purpose of the project, because I want to say it like that, the candidate must obviously examine closely the performance of the brand and the capacity of the concept to generate income.

00:23:15

Gaëlle Helsmoortel: Mmh, value yes.

00:23:18

Didier Depreay: Obviously, we don't do this for nothing either. You have to make a living out of it. So, you need to have some income to be able to analyze the capacity of the concept. Will I be able to live on the budget that these revenues will allow me to generate? So, basically, these are the first things to do, and the candidate must, in my opinion, prepare, that's really the word, a complete file that requires a lot of time. You shouldn't rush into anything. On the contrary, you must compare the brands and give yourself the means to select the brand that corresponds best.

00:24:02

Gaëlle Helsmoortel: Yes, with the Covid and the effect of the Covid, is there maybe, and because you were talking about reconversion at the very beginning of the interview, that the franchise was a wonderful tool for professional reconversion, is there maybe, after the Covid, an additional demand because maybe, some people, for different reasons, want to or have been obliged to make a professional reconversion?

00:24:33

Didier Depreay: Crises always generate vocations, independents. That's clear. And the Covid pandemic has generated a lot of vocations, because a lot of people, workers have been wondering about their future. Franchising is a great way to reconvert. I said it earlier and especially when the economy is coughing. The franchise offers a framework and an integration process and an initial training plan that only exists in franchising. I also believe that the period following the pandemic will see many more projects come to fruition in multiple areas. I'm convinced of that.

00:25:15

Gaëlle Helsmoortel: Yes, I think so too, you confirm what I thought. Perfect, so that was more advice for the franchisee candidates. But do you see a lot of people who are really starting a franchise from scratch or are they more like franchisee candidates with all the impact that it can have and the file they have to put together? Yes, with all the questions they have to ask themselves? Whether it's personal or value generation, are there many who start their franchise from scratch?

00:25:56

Didier Depreay: Yes, but it's usually also a diversification for a certain number of brands that want to develop a network, that already have a network of branches or that want to transform their branches into a franchise, or rather develop a mixed network with franchisees alongside the branches. Generally, a company that wants to expand outside of its home market is looking to expand more through franchising. The further away it is, the more different the values are, the more unfamiliar the market is, and the less likely it is that you will want to develop branches, the more you will go for a franchise. So, yes, I think that the franchisor or the candidate franchisor must inform himself on everything he has to do. This is one of the roles of the Belgian Franchise Federation. It is to welcome starters. We call them that first. Or franchisees, junior franchisors, who already have one or two franchises or one or two franchisees in their network and who, before going any further, ask us for advice, ask us how to do it or what steps they need to go through to do it smoothly, without too many trials to go through. Because obviously, any development, any growth of a company generates hardships, that's obvious.

00:27:24

Gaëlle Helsmoortel: It's clear, I confirm, indeed, there are trials at each stage. But I think it's good to have a federation where we know that even if we start this adventure, we have an organization that can potentially give us data, give us answers to our questions, and maybe surround us. I find that quite positive. It's maybe also and it's specific, an added benefit, I think, of being open, right?

00:27:56

Didier Depreay: Yes, it's true that in other sectors, other types of commercial partnership like the dealership, which obviously exists a lot in Belgium, which is moreover legislated and which essentially concerns the automobile sector... well, it also has its advantages, of course, but it's true that in franchising, you have to be more attentive to a certain number of things because you are transmitting a brand name with its visual identity, an exclusivity of the products, that's not nothing. Well, we tell someone that you will have to respect referencing, compulsory ranges and you must not go outside of them. That doesn't mean that you don't have the opportunity to express yourself or to discuss or to ask for changes. Of course, all this exists in franchises. Franchisees obviously have the right to speak out to make the franchisor's concept evolve. And then, benefiting from permanent technical and commercial assistance, I think that franchising is indeed the most “integrated mode of commercial partnership”, the one that goes the furthest in the accompaniment of these distributors if you want to call them that. So, the franchisees probably feel more integrated, form a kind of family that is more integrated than in the other modes of commercial partnership.

00:29:37

Gaëlle Helsmoortel: Well, listen, thank you very much, Didier. I find it very interesting. So, I love the subject and you were saying that it's not necessarily sexy. I find it, I repeat that I find it a sexy subject to talk about many other themes, but with pleasure, we can do it again on other occasions for other episodes. But here's the thing, I thank you very much for accepting my invitation and for taking the time to discuss the franchise with me.

00:30:04

Didier Depreay: Well with pleasure Gaëlle.

00:30:08

Gaëlle Helsmoortel: Well, if you want to add something, I don't know, but otherwise I say thank you and see you soon!

00:30:14

Didier Depreay: See you soon, Gaëlle! Goodbye, Gaëlle.

00:30:16

Gaëlle Helsmoortel: Goodbye.