Q&A with the European DIY Retail Association
President of the European DIY Retail Association Manfred Maus speaks to Daniel Schleidt about his experiences as a franchisor in Germany
Q: How did you become a franchise pioneer in Germany?
Manfred Maus: In the 1960s I launched home & garden do-it-yourself store OBI. My idea was to consolidate the small to medium-size industries and family businesses by bringing them together under one brand. This was a means to help them in the long-term better compete with the bigger distribution groups. In this fashion, franchising in Germany came into being.
Q: Since that beginning, quite a lot has happened in franchising in Germany. Today people talk about a boom.
MM: I have followed the development of franchising very closely, and I think that in Germany today we have great opportunities of developing franchising so that it becomes one of the best entrepreneurial formats with which to grow independent businesses and create employment. The Deutsche Franchise Verband's (German Franchise Association) current objective is a campaign to create 200,000 jobs in franchising, in particular through the internationalisation of indigenous brands.
Q: What is your optimism based on?
MM: On human motivation - a person is happier working 18 hours for him or herself rather than 12 hours for someone else. Therefore franchising, in which the franchisee is an independent owner/operator, is more productive because the franchisee finds himself in a supportive network which strengthens free enterprise. Franchisees are thus better motivated in their entrepreneurial activity, and overall productivity increases.
Q: But why is franchising seemingly picking up speed now?
MM: Globalisation is an evident factor in why franchising is picking up so well today. Entrepreneurs of all sizes and at all levels are now faced with new competitors from Eastern Europe and Asia. Small and medium sized enterprises, which franchises typically are, have to find means to become more productive in order to adapt to this globalised competition. The result is that the mechanics of network management and marketing like in franchising offers the forms that can offer this competition.
Q: Do you believe that things would move even faster if, for instance, German franchise systems internationalised more?
MM: Internationalisation is undeniably a growth factor in the years to come. However, this also means taking on new forms of risk because, for instance, the franchise know-how has to be adapted to other cultures. The know-how of a company from Germany cannot be transferred to Russia on a scale of one-to-one. It must be adapted to each respective culture, and for this to be possible the franchise company needs capable people in the target country. This is why franchising is such an excellent tool for internationalisation. Another factor - the choice of name of the brand is crucial. It must be pronounceable and translatable in most languages, in German, in Chinese, in Russian, etc. The public must be able to remember it. Take OBI...it works in all languages!
Q: What are the prime factors to set up a franchise system?
MM: The most important factor is the idea. Firstly, the concept must bring benefit to the customer. Secondly, it must be workable, feasible and duplicable otherwise it cannot be franchised and even internationalised. Thirdly, the concept has to be tested on each specific market beforehand. This means in the first place that I as franchisor have to finance a pilot scheme myself and on the basis of this test prove that the invested money has yielded interest. Any concept that is not tested and proven profitable before being franchised is a business swindle. Lastly, the franchise know-how must be implemented in a consistent and disciplined manner.
Q: What must a franchisor pay attention to when selecting franchisees?
MM: Franchising is like getting married. If you accept the wrong partner in your system you may ruin your franchise model and network. Franchising is all about providing a service. Rendering service to the customers must be part of the franchise corporate culture: franchisor to franchisees, franchisees to the end customer. A franchisee with a nine-to-five mentality should not be in franchising. He or she must exercise his capabilities in another context. This is not an entrepreneurial spirit. Successful franchising is all about dynamic and service-minded entrepreneurship.
Q: Do you believe that franchising is a true motor to the economy in that it makes people more economically responsible?
MM: If you own your business or have a share in a company your sense of responsibility is much higher. People are ready to invest more and to achieve more. This can only be beneficial to our economy and to our future.
Q: For a franchisee to be successful, must he or she identify with the franchise system?
MM: A potential franchisee must know where his interests and talents lie. You must choose a franchise, not solely on the profit margins, but your liking of the franchise concept. It must correspond to your talents and personality. For example, if you have no feeling for travelling and languages, you shouldn't really be considering a franchised travel agency.
Q: Where do you see franchising in 10 years?
MM: I believe that in the next 10 years, franchising can become the decisive growth engine and create jobs in the distribution sector, retail and services, not only in Germany, but the world over.