Using an Agent or Distributor

Please refer to our European Union Country Commercial Guide article on using an agent or distributor.

Establishing an Office

Anyone can open an office in Germany – irrespective of nationality or place of residence. There is no specific investment legislation in Germany, nor is there a minimum percentage of German shareholdings required for foreigners. Investors can choose the most suitable legal form, i.e., a corporation, a partnership or conduct business via a German branch office.

Foreign companies with a head office and registered business operations outside of Germany can establish a German branch office. This business form is suitable for a foreign company wishing to establish a presence in Germany for the purpose of initiating business and maintaining contacts with business partners.

For more details see information from Germany Trade and Invest: Establishing a Company.

For the latest Investment Climate Statement (ICS) which includes information on investment and business environments in foreign economies pertinent to establishing and operating an office and to hiring employees, visit the U.S. Department of Department of State’s Investment Climate Statements website.

Franchising

U.S. businesses looking to franchise within the European Union will likely find that the market is quite robust and friendly to franchise systems in general. There are several laws that govern the operation of franchises within the European Union, but these laws are fairly broad and generally do not constrain the competitive position of U.S. businesses. The potential franchisor should take care to look not only at EU regulations, but also at local laws concerning franchising. More information on legislation relating to franchising can be found on the website of the European Franchise Federation.

German Franchising Market

Key to a successful market entry is finding the right partner with which to develop the market. Multi-brand franchising is still relatively unknown in Germany, but according to the German Franchise Association it will become more important in the future. Individuals/companies already in the franchise market have the expertise and financial connections to pave the way. Reaching out to these active players can greatly ease the access into Germany and provide local knowledge of the market. This can be achieved through cooperation with the industry/trade associations, franchise consultants, brokers and media channels reaching out to the appropriate industry audience. Individuals/companies already in the franchise market can also help create brand awareness that minimizes the risk for the potential investor. German business partners prefer to talk directly to the owner, not the manager. German business partners are cautious investors and prefer to see new concepts tested and proven successful in Germany before investing in them, even if a business has already been successful in its home or neighboring country. U.S. franchisors are advised to first set up a subsidiary as a corporate pilot with a German partner and then start franchising.

Germany’s population and industry are decentralized and there is no one single predominant business center. It is common in Germany for franchisors (and many other business sectors) to divide the country into regions and then appoint area developers to oversee a group of franchisees. Successful market strategies consider regional differences as part of a strong national market presence.

There are many options for advertising on the German market. A selection of franchise focused sites/media include:

Magazines:

• FRANCHISEConnect: www.avr-werbeagentur.de
• franchiseErfolge: www.unternehmerverlag.de

Online Platforms:

• Deutsche Unternehmerboerse https://www.dub.de/ (in German) – print and online, site advertising investment possibilities
• Franchise Pool International (FPI) www.franchisepool.org (in English and German) – consultant pool with listing of franchises
• FranchisePORTAL www.franchiseportal.de (in German) – virtual franchise fair with listing of available franchises
• Punkt Franchise (in English and German) https://www.punktfranchise.de – virtual franchise fair with listing of available franchises

Franchise Trade Events in Germany:

• Franchise Expo Frankfurt – conference and exhibition for the franchise industry, Frankfurt
• EXPO REAL – Europe’s largest real estate and investment trade fair, Munich

Direct Marketing

Most German companies use direct marketing to sell their products and services. The most frequently used formats are email and online marketing, telephone marketing, and direct mail. It is important to know the pitfalls of using direct marketing as a selling tool in Germany. Data protection and privacy laws are stringent, and consumer protection guidelines and competitive advertising are also highly regulated. Companies should consult with a lawyer before raising, storing, or processing any sort of data in Germany. Other potential challenges regard the laws pertaining to unfair competition and rebates.

Joint Ventures/Licensing

Dealing with joint ventures is challenging under German competition law. In Germany, joint venture legislation falls under the purview of the Federal Cartel Office (Bundeskartellamt). The law requires that a joint venture must exercise “genuine entrepreneurial” activities. Under German law, this means:

Organizations which merely carry out auxiliary functions such as purchasing or distribution on behalf of the parents are not considered joint ventures; andJVs must have at their disposal sufficient assets and personnel to carry out their activities.

The Bundeskartellamt is required to prohibit a merger if it is “expected to create or strengthen a dominant position.” Market dominance is defined as an undertaking which either has no competitors or is not exposed to any substantial competition or has a paramount market position in relation to its competitors.

Licensing

German antitrust law does not, in the absence of a dominant market position, restrict the owner’s freedom to use her/his industrial property rights, including the exploitation of a patented innovation.

Express Delivery

Most international express delivery companies are active in Germany. Large players include DHL and Hermes (both headquartered in Germany), FedEx and UPS. These companies ship domestically and internationally, provide a wide range of delivery options and prices and have grown significantly because of e-commerce. An increasing number of companies incl. Amazon, Flink and Decathlon (sporting goods retailer) offer same day deliveries in large metropolitan areas.

Due Diligence

Product safety testing and certification is mandatory for the EU market. U.S. manufacturers and sellers of goods have to perform due diligence in accordance with mandatory EU legislation prior to exporting.

Companies interested in taking over German firms should always conduct their own due diligence before entering business ventures. One of the U.S. Commercial Service’s programs, the International Company Profile (ICP), has been designed to support due diligence processes. All major consulting companies offer due diligence services, and most large U.S. accounting or consulting firms have subsidiaries in Germany.