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German Franchise Association publishes Franchise Klima Index, analyzing effects of COVID-19

German Franchise Association publishes Franchise Klima Index, analyzing effects of COVID-19

Germany’s leading franchise authority has released its bi-annual analysis, revealing continuous support is needed.

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The German Franchise Association has published the latest Franchise Klima Index (FKI), which evaluates the current condition of the German franchise market. This latest iteration is particularly notable, as the true effects of the COVID-19 crisis can be scrutinized, and the future of franchising within Germany becomes clearer.

“Despite the current exceptional situation, the FKI is stable and the detailed comparison markers also indicate that the basic mood within franchise systems are still rather positive,” says Torben Leif Brodersen, general manager of the German Franchise Association.

The data reveals that 56 per cent of franchise respondents experienced negative effects overall as a result of COVID-19. However, when examined at a sector-by-sector level, there are glimmers of positivity. In the retail segment, for example, only 36.5 per cent experienced negative consequences, whereas 45.5 per cent responded positively.

Naturally, the gastronomy segment, which was hit hard by the fallout of the virus worldwide, responded with 73 per cent negative experiences.

The survey also revealed the current challenges facing the franchise industry, with financing and liquidity being the primary issue at 32 per cent, followed by lead generation (26 per cent), and the implementation of distancing and hygiene measures (21 per cent).

In terms of sales, an average drop in sale figures of 30 per cent is now expected, with one out of every 10 respondents estimating the drop could be as steep as 61 to 100 per cent.

Aid packages have proven invaluable over the last six months, with 81 per cent of franchisees in Germany taking advantage of relief measures including corona aid packages, KfW loans, and emergency aid.

“The support measures that have been launched quickly are good, no question. However, we urgently need further support for small and medium-sized enterprises – even beyond 2020,” says Torben Leif Brodersen. “We have to assume that the effects of the corona epidemic will occupy us for years, not just a few months.” This is confirmed by the FKI, which details that it takes an average of one year to recover from financial losses.

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