Despite its small size and competitive marketplace, Denmark’s strong traditions of promoting international trade and embracing innovation make it a very interesting prospect for franchisors and investors.
With a population of just under six million and very little in the way of natural resources, Denmark may seem to be a small and inconsequential market to the uninitiated. However, there are few who are not aware of its reputation as a leader in global trade.
The Danes’ entrepreneurial skill, practical nature, and willingness to embrace new ideas have not only positioned them as a powerful market force in their own right but also allowed them to play a significant role in shaping the economy of the entire region.
As a result, Denmark’s economic success is very much disproportionate to its relatively small size. Despite being ranked at just #133 in the world in terms of size, Denmark’s modern economy and liberal trade policies mean that it is able to boast an enviable position as #39 in terms of national GDP. With imports and exports making up an impressive 50 per cent of this GDP, the small but powerful nation is a very attractive prospect for the franchise industry.
Before considering a move into this market, it is worth taking the time to understand the key concepts that drive the Danish attitude towards business and franchising:
A positive view of franchising
In previous years, franchising was not always viewed favorably in Denmark due to a series of negative experiences where a few international brands did not manage their franchises effectively.
However, this attitude is long in the past and, as a whole, franchising is now viewed very favorably by the Danes. Franchising is rightfully seen as a very effective way to build your own profitable enterprise and is now a very well-established model in the region. It has proven to be very successful amongst both international brands coming into the region, and Danish concepts being exported out.
“Danes are a very critical people who focus on quality and content when assessing a concept’s viability”
Some of the most notable success stories among international brands in recent years are those that have contributed to the development of the retail sector, such as Pandora, BoConcept, Tiger, Joe & the Juice, and Bestseller, among others.
The concept of “GloCal”
This concept of marrying global and local is extremely important in Denmark. When a global brand is available in the local market and also contributes to the local economy by providing opportunities to local businessmen rather than taking from the economy and contributing nothing, this appeals to Danes’ sense of social responsibility. In this respect, a franchise that reflects this ethic can be very attractive to local investors, as the model is seen as providing the best of both worlds.
Innovation
The Danes have always used their considerable skill at innovation to drive forward their economy, and as such, are also very open to new ideas. This is particularly the case at the moment when there are a lot of exciting new developments and concepts in the region as the entrepreneurial Danes respond to the current challenges. For this reason, knowledge- and technology-heavy companies tend to do extremely well in Denmark.
However, with this very high standard in their own homegrown innovative ability, comes a very high expectation of strength of concept in new ideas coming in. Danes are a very critical people who focus on quality and content when assessing a concept’s viability. New franchises will need to be sure that their plans and concepts are very clearly thought out in order to impress investors.
Working with a local expert can help a great deal with this, providing you with a sounding board for your concept, and making sure it is attuned to local attitudes. Danes like to see ideas that reflect Danish design – clear, simple lines!
Leadership and efficiency
This design simplicity is also reflected in how Danes like to run their companies, preferring a simple and informal organizational structure with easy access to top management. They prefer a form of management that is extremely agile and ready to deal with any problems that may come its way.
While Denmark has shorter working hours, longer holidays and higher wages than many of its European neighbors, Danes are also extremely hard-working and are considered one of the most productive and efficient workers in the world. Moreover, higher wages mean that Danes have a great deal of purchasing power and are able to draw on the capital necessary to invest in larger franchises.
This combination creates a unique identity in the market, as well as its own unique opportunities and challenges. Again, meeting these challenges and making the most of the market, can be a struggle for international brands without the ‘insider’s perspective’ that comes from working with local consultants.
Fierce competition
Denmark is undoubtedly a very crowded marketplace, with a great number of already established brands dominating the scene. Salaries and taxes are high, and both customers and investors are extremely cost and value-conscious. This makes for very fierce competition and means that Denmark can be a difficult market for new brands to break into. The market is limited and it is not enough to simply establish a unit and open the door; customers do not come by themselves.
“With imports and exports making up an impressive 50 per cent of this GDP, the small but powerful nation is a very attractive prospect for the franchise industry”
However, with the right concept and preparation, a successful franchise in Denmark can be incredibly rewarding. You can greatly reduce the risk involved by using international consultants to help you form a connection with a local company of experts. This allows you access to the knowledge you need to adapt your franchise’s appeal to the local conditions and make the most of the opportunities this market offers. It also contributes to your credibility in the eyes of prospective franchisees and helps you to attract the right candidates.
Establishing a local presence here will allow you to hone your brand offering to meet even tougher markets, as well as providing you with a springboard for expansion into the rest of Scandinavia.
THE AUTHORS
Farrah Rose is head of international development at The Franchising Centre and is a long-term member of the British Franchise Association.
Tom Skovbon is CEO of FranchiseHub, one of Denmark’s industry leaders in the export, import and development of franchise concepts.
