Home to some of the world’s most successful franchises – like IKEA and H&M – the franchising sector in Sweden is both fresh and dynamic.
In comparison to many other countries, Sweden was a little late to the franchise game – in terms of both native franchises, and those coming in from abroad. While franchising was well into its swing during the 80s and 90s in the U.K. and Europe, for example, the market in Sweden did not really take off until the early 2000s. Since then, however, the sector has been booming and it is obvious that the Swedes are wasting no time in catching up with their neighbors. Here is what you need to know about franchising in the region if you are considering tapping into this rapidly growing market.
Attitudes towards franchising have never been so positive
Prior to the early 2000s, franchising had very bad press. The Swedes have a strong tradition of protecting worker’s rights, and many early international franchises, particularly from the U.S., were seen as being exploitative and the whole concept of franchising was tainted by these bad early experiences. However, this attitude has changed dramatically among those who grew up in the 80s or later who now rightly view franchising as an opportunity for empowerment and self-advancement. This has been even further strengthened by the influx of immigrants in recent years who are bringing this positive attitude with them.
For a country of just 10.5 million people, Sweden can now boast more than 750 different franchisors, many of which operate very substantial turnovers. This success is spread across a wide variety of industries. Restaurants, coffee shops, and convenience stores have done very well traditionally, with fitness and health and beauty following close behind.
Most of the franchises you will encounter in Sweden are Swedish, but international brands are making increasingly successful in-roads into the country. Master franchising of these brands was not particularly prevalent in the past but is also becoming increasingly popular as Swedes come to recognize the opportunities they represent.
“Growth has continued to be consistently strong and stable, even in the face of the economic turmoil of the COVID-19 pandemic”
On the whole, Swedes are early adopters who are very open to other countries and cultures, but they can also be quite discriminating in how they spend their money. Nevertheless, once something has proven its worth, word of its success can spread very quickly. Franchisors are well-advised to seek the help of local experts and consultants to properly understand how this mindset works. This is especially important in light of the fact that Sweden has experienced a very high level of immigration in recent years and the new multi-cultural mix is having an effect on traditional demand that can be difficult to follow without the right eyes and ears on the ground.
It’s a small country but one with a powerful economy
Like many of its immediate neighbors – such as Denmark and Norway – it is easy to underestimate the Swedish economy by looking just at the surface details. Its small population in comparison to other European nations may make it seem like a marginal player in the regional economy, but Sweden’s GDP was ranked as the 12th highest in the world in 2019 according to the IMF. While Sweden is not exempt from the various challenges facing Western economies in recent years, growth has continued to be consistently strong and stable, even in the face of the economic turmoil of the COVID-19 pandemic.
Personal wealth is quite high in Sweden, with a large proportion of the population belonging to the middle classes. The country has not suffered as much as its European counterparts during recent recessions, and its strategy for dealing with the pandemic, while controversial to some, has meant that its economy has not taken the same hit that its neighbors have. Taxation is high in the county, but so is the average wage. As such, the Swedes have strong purchasing powers to invest in franchises that attract them. Combined with a generally very high level of education, the country has great potential for supplying successful franchisees that suit a wide range of international concepts.
Finance can be challenging
Despite this personal capital, many potential franchisees will still need to borrow money to invest fully in their desired franchise, and Swedish banks can be very risk-averse in relation to new businesses. It can be a bit of a minefield for the uninitiated. Private individuals are also often required to offer their homes as collateral on business loans, so will be reluctant to take this risk without strong reassurances.
“International brands are making increasingly successful in-roads into the country”
Therefore, new franchisors in the region are strongly advised to look to local experts to help them present their financial information in a way that will appeal to borrowers and lenders. Both will need to see that there is very clear evidence of a return on their investment. Any way in which franchisors can help mitigate start-up costs, through leasing, for example, will also be very well received by potential franchisees.
All in all, Sweden is a very attractive prospect for any international brand looking to expand into the region. However, franchisors will need to put in the work to ensure that they create confidence in their concept before they can successfully recruit the right candidates. The use of local experts and international consultants can help you to adapt the franchise concept to suit the local conditions, as well as use their networks to attract franchisees that can work with you to drive your brand forward.
THE AUTHORS
Farrah Rose is head of international development at The Franchising Centre and is a long-term member of the British Franchise Association.
Kristina Uhrgard Perman is co-founder, senior consultant and CEO of Franchise Group Nordic AB, and author of Franchising – An Introduction.
