fact sheet
Guidelines for starting a franchise business
Franchising has been a well-established concept in Sweden since McDonalds first arrived to spread throughout the country.
Franchising means that someone who has started his own company and has managed to achieve a successful business will let one or more company owners “hire” or use the company name and the business concept. It is a long-term cooperation between two business partners. The cooperation is regulated by an agreement signed by the two parties. Franchising can be described as a sort of sale permission and it may be practiced almost within any sector where products and/or services are being marketed. Therefore franchising is not a business entity but rather a way of doing business. Swedish franchising history At the beginning of 2004, the estimated number of franchising chains in Sweden was approximately 300, the majority of which is of Swedish origin. Comprising some 15,000 franchise units, employing 100,000 persons, the total turnover of Swedish franchising is approximately 10 billion USD. About half of the franchisers is active in retailing, however consulting and restaurants are also common fields of business. Top ten franchising systems in Sweden
Company Number of franchise units Posten Sverige AB 2800 Svenska Turistföreningen 309 Svenska McDonald’s 235 Sibylla/Nordic fastfood 229 JCA Aktiebolag 217 AB Svenska Pressbyrån 160 Elkedjan 156 Färgtema 132 Gröna Konsum 122 Tema Sportia AB 110 Electrolux Home Svenska AB 106 Däckteam 100
Rules and regulations There are no specific regulations for franchising, but certain legislation does exist that impacts the establishment and running of a franchise operation, and one should take these and other laws into consideration: • The contract act • Intellectual property legislation • The agency act • The competition act The franchise agreement There are no standard agreements that regulate a franchise business, but every agreement is set up individually in accordance with the particular needs of the partnership in question. The franchise agreement is set up between two independent parties, who will continue to be independent legally and economically. The agreement shall be in writing and clearly define the rights and obligations of both parties as well as the division of labor between them. In the agreement the franchise holder will grant the franchisee the right to use a company name, a trademark and a system. The experience and know-how of the franchise holder is often also offered to the franchisee’s disposal. The franchisee will commit himself to the policy of the operation in order to strengthen the picture of a group of stores with a standardized structure, quality and service. The economic details are settled in the agreement. Normally the franchisee pays an “entry fee” and after that a royalty that is usually based on a percentage of the turnover.
A large majority of franchising systems has started since 1990, and the number is expected to increase in coming years.
Published in October 2005 Invest in Sweden Agency P.O. Box 90 SE-101 21 Stockholm, Sweden Phone: +46 8 402 78 00 Fax: +46 8 402 78 78 E-mail: isa@isa.se www.isa.se
fact sheet
Registration of a company In order to carry out the franchising business the franchisee has to register a company. The legal company form, such as limited liability company or trading company is often stipulated in the agreement. The procedures for starting a company are the same for the franchisee as for others.
The Swedish Franchise Association Although not required by law, franchisers are advised by the Swedish Franchise Association to describe their concepts and inform franchisees in an official manner through a form provided by the association. This gives both parties a clear starting point for future cooperation. Among other elements, the document should contain information about the franchising system, the franchisee’s obligations, marketing responsibilities and the fees the franchisee is to pay under the agreement.
For more information:
Swedish Franchise Association (Svenska Franchiseföreningen) Sofierogatan 3A SE-412 54 Göteborg Phone: +46 31 40 55 10 Fax: +46 31 81 10 72 info@franchiseforeningen.se www.franchiseforeningen.se
Effectum Franchise Consulting Södermälarstrand 29, 6tr SE-118 25 Stockholm Phone: +46 8 652 12 00 Fax: +46 156 17572 info@effectumsweden.se www.effectumsweden.se Established in 1983, Effectum is experienced in helping companies and organizations to develop their franchising business.
Franchisekollegiet Danderydsgatan 11 SE-114 26 Stockholm Phone: +46 8 646 00 00 Fax: +46 8 34 93 25 office@franchisekollegiet.se With ten consultants Franchisekollegiet specializes in starting franchises, analyzing existing franchises and international franchising.
FranchiseNet i Skandinavien AB Sofierogatan 3A SE-412 51 Göteborg Phone: +46 31 40 72 00 Fax: +46 31 81 10 72 info@franchisenet.net www.franchisenet.net FranchiseNet is a link between franchisers and franchisees. The website contains information about franchise-related issues.
Advizor Petter Dahlberg Kungsgatan 66, 5 tr SE-111 22 Stockholm Phone: +46 8 410 664 20 petter.dahlberg@advizor.se www.advizor.se Advizor has six highly experienced consultants assisting business chains in the retail and service sectors.
Invest in Sweden Agency, ISA, attracts and facilitates foreign direct investment in Sweden. Responsible to the Ministry for Foreign Affairs, ISA informs about Swedish advantages and assists foreign companies with facts, advice and contacts when considering setting up business in Sweden. ISA cooperates with a national and international network.