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Entrepreneurs catch on to attraction of franchising

By Theodora Liakopoulou

Having lost their jobs or seen their incomes plummet, an increasing number of Greeks are looking for a way out of the professional deadlock by exploring options that don’t require too much start-up capital but can still ensure adequate earnings.

Franchising has gained a lot of ground in the past year, with new entries surpassing the million mark, whereas before the crisis there were just 500,000-600,000 people involved in such businesses.

Some experts are surprised at the level of interest given the current dire business climate in this country, but the head of the Greek Franchising Association, Petros Petridis, told Kathimerini that “franchising is proving resistant to the downturn in the market, while interested parties are also turning to these businesses in search of work or because they want to start up an enterprise with as little money as possible.”

Last year, 70 percent of the people who sought a new start in franchising began with capital of 40,000 euros or less, which could be used to develop new low-cost concepts. One example is Sicily Cafe, a snack stand with no seating area which serves takeaway coffees and snacks, with prices ranging from 1-1.50 euros. Another is Sticky, a chain that sells decorative items and specializes in large stickers for walls at an average price of 30 euros.

Ice-cream producer Dodoni, which has a chain of ice-cream parlors, has also picked up on the benefits of franchising and launched frozen yogurt stands called Chill Box, which can be opened with start-up capital of just 30,000-60,000 euros.

“In the past, franchisees would expect their monthly income to come to or even exceed 5,000 or 6,000 euros a month. Things have changed today and they are satisfied with making 1,500-2,500 euros instead,” said Platon Malikourtis, owner of consulting firm Franchising Business Services.

Despite the economic crisis, the penetration of franchising in the Greek market is on the rise and currently stands at around 10 percent. Last year saw the opening of some 120 new franchise stores and 42 new chains, though on the downside, around 400 stores and 15 chains closed down. To be more specific, out of every 160 enterprises that closed in 2011, only one was a franchise, and while in that year 65,000 establishments went out of business (or 25 percent of the total), the respective figure for the franchising sector was 2 percent for the sector and 0.15 percent for the market total.

In the retail market as a whole, revenues have dropped significantly by levels ranging from 15-35 percent, with the shortfall in the first three months of 2012 boding ill for the future as it has already reached 10 percent. Furthermore, one in four chains, or 25 percent, reported a significant decline in turnover as a result of the crisis.

The biggest hit has been taken by the clothing and footwear sector, which has seen a decline in revenue of over 60 percent, while the smallest impact has been on food and catering, where losses range from 10-20 percent. The overwhelming majority has responded to this spiraling of business with constant offers and special deals.

On the demand side, food and catering remain at the top of the earners’ list, with services coming close, while cosmetics find themselves at the very bottom.

Greece’s current franchise list consists of 2,500 grocery stores, 1,500 cafes and restaurants, 2,500 education and training centers, 3,500 clothing stores, 1,000 companies providing various services, 1,000 homestores and 500 cosmetics stores.

ekathimerini.com , Monday May 7, 2012 (23:16)  
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