Wednesday, July 29, 2015

American Franchises in Germany

I noticed this week in my walk around Wiesbaden.....a new Kentucky Fried Chicken (KFC) operation in the train station.  It was an old newspaper shop and renovation had really sparked a nice atmosphere for the franchise.  It's the third KFC in Wiesbaden.

It's a short list of franchises that succeed in Germany: Subway, Burger King, McDonalds, Pizza Hut, Dominos, Starbucks, and KFC.

Limiting factors?  Each has a different issue.

To be honest, KFC has no real competition. Germans haven't ever been into fried chicken that much and there's an open field.

Both McDonalds and Burger King have grown at a fast pace and I suspect both have hit some peak.  Negative coverage in the past year have suggested issues with franchise owners (expecting more payback) and quality issues.

Pizza Hut has a number of shops around the country and does decent business....but Germans also have regional franchise operations of their own variety and there's tons of competition.  Dominos has barely gotten into the market and feels the same problems.  Frankly, after you've eaten a real Italian-style pizza (even if made by a German)....it's hard to find a reason to return to Pizza Hut.

As for Subway?  They claim the operation is still growing and expanding in Germany.  They have a low-competition situation currently.....with almost no real German sub shop in existence.  Between the part-time employee angle, cost of raw goods, and taxes.....I'm not that sure about owners profiting in a major way.

Then you come to Starbucks.  If you asked a thousand adult Germans about Starbucks.....I think less than thirty would admit they've been to one (probably on some US trip, they were introduced to the quality coffee shop).  In Wiesbaden....we have two shops.  In an average year.....I'll stop by on two or three occasions.  To be honest though....German coffee shops can make the same quality coffee, for approximately twenty-percent less than Starbucks.  The sugar treats at Starbucks?  Over-priced when you compare what most simplistic German bakery/coffee shops will serve.

It's hard to drive a German toward these American-theme concepts.  Face it.....if you could pay $12 and get a dinner which was made with original ingredients, no food enhancement gimmicks, or greasy additives....why would you settle back for a fast-food dinner?

What works in the US....doesn't necessarily mean it works in Germany.  It's like the ice cream situation.  After you've had real authentic Italian ice cream.....why would you go back to Baskin-Robbins?  After you've had a couple of different German beers....why would you go back to PBR?

It's a tough market, if you ask me.

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