Conquering Europe Requires a Long-term Investment

Expanding into Europe offers significant growth opportunities, but the journey is fraught with unique challenges. From regulatory complexities to cultural differences, brands must approach the European market with a well-rounded strategy. Here’s a look at some of the challenges (and solutions) that U.S. restaurant brands will need to navigate in Europe.

Challenge #1: Navigating complex regulatory landscapes

Each European country has its own regulatory framework, covering areas such as labor laws, taxation, franchising regulations, and food safety standards. Franchise disclosure laws differ significantly, with some countries requiring detailed disclosures, and others allowing for more flexibility. Additionally, strict employment and food safety laws across Europe make compliance challenging, particularly when franchising across borders. Brands must also comply with GDPR, the General Data Protection Regulation, which imposes strict guidelines on data privacy and customer data management.

Solution: To overcome these challenges, engage with local legal experts who understand the specific requirements of each country. Establishing a local presence or regional team and/or leaning on a well-established local operator (franchisee) can help ensure compliance. Forming joint ventures can offer better insights into local regulations, but be sure that the investment has enough development potential to generate the necessary ROI. This approach has proven successful for brands like Burger King, which uses a combination of local master franchises and joint ventures across key European markets. Five Guys and Wingstop are other brands that leverage the joint venture model, or a variation of it, to ensure success in European markets.

Challenge #2: Fierce competition and market saturation

Europe, especially in major cities, is a competitive landscape with established local and international brands dominating the market. Cities like Paris, London, and Berlin have a high concentration of well-known restaurant chains, making it difficult for new entrants to gain a foothold. In many cases, local consumers prefer familiar homegrown brands, which further increase the challenge for new foreign entrants.

Solution: Differentiation is key to standing out in the European market. Focus on your unique selling points, whether it’s product innovation, exceptional customer service, or creating a distinct brand identity. Establishing flagship locations in key cities and regions can also help build brand visibility. Additionally, localizing menus and adapting product offerings to meet European tastes can give a competitive edge. Brands like Five Guys and Starbucks have successfully adapted their offerings to meet local preferences while maintaining their core identity, enabling them to thrive in competitive markets.

Challenge #3: Local franchising landscape

The number of franchisees in Europe who have developed multi-country are few and the ratio of companies that have the potential to do hundreds of units is much smaller than that of the U.S. Most markets have a handful of national champions followed by very strong regional operators who excel in their respective provinces or regions. Single-unit and smaller multi-unit franchisees are easier to find. 

The majority of franchisees are accustomed to tapping into a local franchisor’s (or master franchisee’s) supply chain and infrastructure and having materials, marketing, and operations support in their native language. This raises the stakes when foreign brands are competing with the local franchise brands, who offer national marketing, strong brand awareness, nationalized plug and play supply chain and local language support materials, and staff. Moreover, if the brand is non-existent in a market, many operators are hesitant to be the first to launch a brand with no previous presence. 

Solution: Expanding the franchising strategy and being nimble on franchise structures will give an advantage. For brands with no presence in the target market, it is not uncommon that potential franchisees request that the brand “put skin in the game.” Being open to equity contribution, smaller development plans to start off and prove the brand and thinking outside the box may be necessary in overcoming the hurdles of local and well-established franchise competition. Positioning a local EU or EMEA team in the region who live the brand DNA and understand the local market is a practice carried out by many U.S. brands in Europe and one that also provides an additional level of advantage to European franchisees.

Challenge #4:  Supply chain and operational complexities

Managing supply chains across multiple European countries presents numerous logistical hurdles. From sourcing local ingredients to managing distribution networks, complexity increases when trying to maintain product consistency across borders. Additionally, disruptions in the supply chain due to geopolitical factors or economic challenges can further exacerbate operational difficulties.

Solution: Focus on building strong local supply chains to reduce costs and improve efficiency. Establishing regional distribution centers in strategic hubs like the Netherlands can streamline logistics and reduce cross-border complications. Partnering with local suppliers also ensures product quality and compliance with local standards. 

By understanding these challenges and developing tailored strategies to address them, U.S. brands can successfully establish themselves in the European market. It’s important to remember that conquering Europe should be a long-term investment and will take focused attention and careful strategic planning to execute. 

Rebecca Viani is Partner with WhiteSpace Partners, a London-based firm, focused on the development and execution of market entry, franchise development, and acquisition strategies for restaurant brands expanding into Europe and the Middle East.