Spain - Franchising Industry SectorSpain - Franchising Industry Sector

Unofficial estimates based on input from trade sources
* Growth for 2019 is estimated to remain at 2 percent.Business development through Franchising can be challenging in many ways, but Spain has shown in recent years that the market maturity and these types of business models are well accepted by Spanish entrepreneurs interested in innovation and opportunities for growth. Now more than ever, there is a sense of prosperity and many opportunities to establish a presence in the country.

Spanish investors are actively seeking new business opportunities as the economy warms up. In 2016, the U.S. market share grew by 3.2 percent. However, in 2017, one U.S. brand ceased its operation in the country, which brought the number of U.S. brands to 41. The good news is that in 2018 the total number of US brands grew to 43, exceeding CS Spain’s prediction for growth. This increase in market share is directly related to CS Spain’s efforts to promote U.S. brands and allowed for more market exposure. Currently, our main competitors are France and Italy.

Operative flagships
Currently, the Spanish franchising system is made up of a total of 1,376 brands – 2 percent more than in 2017, when 1,348 networks were counted – of which 1,130 are of Spanish origin (82.1 percent). The remaining 246 (17.9 percent) come from a total of 26 countries. The foreign countries that bring the most brands into the market (ranked highest to lowest) are France, Italy, USA, Germany and the UK. If we analyze the growth since the AEF started tracking the data in 2001, the number of brands has increased from 646 to 1,376 in 2018, as shown in the graph below.

Franchise in Spain – Number of Flagships


Source: AEF 2018

Outlet stores
The number of operative stores at the end of 2017 totaled 77,397, of which 20,644 were store-owned operations and the remaining 56,753 were franchised systems. In total, there were 2,999 more stores in 2018 than at the end of 2017 (when the existing points of sales were 74,398), which is a 4 percent increase. At the end of 2018, an additional 2,975 new franchises were created, which represented a 5.3 percent increase compared to 2017.

When analyzing the sub-sectors, “Food” has the highest number of open stores with a total of 13,562. The following sub-sectors have what is considered a “higher presence”: “Beauty/Aesthetics” with 4,450 outlets, “Automotive Services” with 3,655 points of sale, and “Travel Agencies” with 3,543 outlets.

The reason behind the high volume of new openings in 2018 may be based on these two key facts:

1.     The improvement in the macroeconomics trends for Spain.

2.     The return of the banking institutions to their main activity, which is the granting of credit (without loans and a strong banking base, the franchise system cannot grow and expand).

Therefore, the good performance in the store growth openings seems to reinforce the growing trend of financing mechanisms available for franchises and the banking sector’s trust in the development of the systems.

Employment
One of the most relevant aspects in the franchise system is that it continues to create employment in Spain. At the end of 2018, the system employed 293,872 people. This is 14,921 more than in 2017, which is a 5.3 percent increase. Relating to this figure, 98,057 work in their own stores (representing an increase of 3.3 percent) and the remaining 195,815 were employed in franchised stores (a growth of 6.1 percent compared to 2017).

The sectors that represent the highest employment growth are: “Food” where 71,182 people are employed, “Hospitality/Fast Food” with 34,872 workers, “Restaurants/Hotels” which employs 22,834, “Beauty/Aesthetics” which employs 12,717, and ‘Transport Services” representing a total of 11,244 people.

In relation specifically to employment generated in Spain during the economic recovery, the franchising system was instrumental in helping Spain’s economy. At the beginning of the economic crisis in 2008, a total of 235,929 people worked in the franchise industry and by the end of 2018, that number had risen to 293,872, which represents an increase of 24.5 percent. This clearly shows that the franchise model continues to be a formula that generates employment in Spain.

Autonomous Communities
Of the 1,376 networks integrating the franchise system in Spain, Madrid remains at the top of the list as the Autonomous Community with a highest number of franchises with 342 brands (7 more than in 2017). Madrid is followed by Catalonia with 331 (10 more than in 2017), the Valencia Community with 177 (8 more than in 2017), Andalusia with 156 (the same number as in 2017) and Galicia with 52 (2 less than in 2017). These autonomous communities make up 76.8 percent of the total number of flagships in this business model in Spain.

Origin of foreign franchises
 
 
 

        Source: AEF 2018
 

Leading Sub-Sectors

The franchise segments that have shown growth and the greatest interest from Spanish investors are:

• Premium Food/Beverage

• Senior Home Care

• Fitness

• Education

• Car services

• Real Estate

• Beauty and Wellness

• Electronics/Computers/Telephones repairs

• Fashion

Opportunities

The Spanish Franchise Association’s (AEF) annual report for 2018 reflects the upward growth trend of the franchise sector in Spain in respect to multiple variables including: number of networks, number of establishments, employment, and total sector sales. The President of the AEF commented that this indicates growing confidence in this sector which offers advantages and the adequate environment for new brands to enter Spain and existing ones to invest in their expansion.
When we focus on the sectors with the biggest share in the Spanish franchise market, the services sector shows the most growth, not to mention that more than half of all franchises are in this sub-sector. According to the report, the biggest group of franchises is food related, with a total of 13,562 establishments in 2018. They are followed at some considerable distance by beauty-aesthetics with 4,450 establishments and automotive services with 3,655 outlets.
This boom in the franchise system can be understood from different perspectives. The first is its capacity to adapt to market circumstances. Franchises in sectors that became necessary during the financial crisis have sprung up, such as establishments that buy jewelry, pawn shops and sports betting.

This business model is also attractive to entrepreneurs, mainly because the business can take off with the safety net of the franchise structure behind it. Franchisees receive guidance on what they need to invest, how to do it, and what kind of profits they can expect.

CS Spain offers customized solutions for U.S. franchise brands interested in our market. Please contact us for a special business proposal.
 
The major trade shows that are promoted to both Spanish and US audiences are:

• Int’l Franchise Expo – New York
  May 30 to June 1, 2019

• Expo Franquicia Trade Show – Madrid
  May 7-9, 2020

Web Resources
AEF-Asociación Española del Franquiciador-Spanish Franchise Association
International Trade Administration – Top Market Report

U.S. Commercial Service Spain:
Franchise Sector Specialist: Angela Turrin
Tel: +34 91 308 1567
e-mail: Angela.Turrin@trade.gov