We quote from a comprehensive publication entitled “Franchising: USA vs. Europe” based on a lecture given by Dr. Thomas Komarek in Dublin, Ireland, in May 2026.
Franchising is generally understood to mean a partnership between two parties based on the transfer of rights. Franchising is primarily used to tap into new markets as a means of expanding sales. The origins of franchising are thought to date back to the late 19th century in America. Today, franchising represents a modern approach to distribution.
The key differences between franchising in Europe and the USA lie in strict legal regulation, the maturity of the market and cultural homogeneity. Whilst the USA is the historical birthplace of modern franchising, with uniform, strict disclosure requirements, Europe presents itself as a highly fragmented market with varying national laws and voluntary industry codes.
In the USA, commercial franchising is extremely widespread and accounts for around 3% of the country’s gross domestic product. The principle is as follows: a franchisor provides an independent entrepreneur – the franchisee – with a ready-made, tried-and-tested business concept, trademark rights and corporate design in return for a fee. Well-known examples: fast-food giants such as McDonald’s (the US franchise with the highest turnover), Subway, or hotel chains such as Marriott.
In the film, television and gaming sectors, a franchise refers to a media brand that is commercially exploited beyond the original work. The principle: a successful film or book is developed into a brand that includes sequels, spin-offs, merchandise (toys, clothing), video games and theme park attractions. Well-known examples: Star Wars, the Marvel Cinematic Universe (MCU) or Harry Potter (Wizarding World).
Special case: The term ‘franchise’ in US sport
In the US, the word has a completely different meaning in sport. Whilst European sports clubs are independent and compete in open leagues with promotion and relegation, US professional teams (e.g. in the NFL or NBA) are legal ‘franchises’ of their respective leagues. The league is a closed system. Team owners acquire a licence (franchise), which is why teams can theoretically even be relocated to other cities.
Attempts to establish American models in Germany fail not only due to cultural differences and questions of mindset, but also because of the legal framework. Whilst systems such as the MLS in the USA ensure complete transparency, data protection regulations and a decentralised understanding of the market stand in the way in Germany.
US federal and state tax structure
In the US, corporate taxation operates on two levels. Federal taxes apply nationwide, but each state may levy its own corporation taxes, franchise fees or filing requirements. This multi-tiered structure means that tax obligations can vary depending on where the company is incorporated and where it operates, which increases the administrative burden for foreign founders.
VAT vs Sales Tax Complexity
The UK uses a VAT system with clear registration thresholds and standardised rules. In the US, sales tax is administered at state and sometimes city level, with varying rates, exemptions and filing schedules. Businesses selling across state lines may need to track multiple tax jurisdictions, increasing operational complexity.
Ongoing tax administration efforts
UK tax management is generally easier to handle remotely, as the system is centralised and well-documented. In the US, ongoing tax work often involves coordination between federal filings, state returns and sales tax compliance. Over time, this may require more specialist support and closer monitoring.
Franchising in the USA – Benefits for European franchisees
When European franchisees become franchise partners in the USA, they benefit from a mature, highly regulated market, attractive visa options and significant opportunities for scaling up that are not available in Europe. The US market offers entrepreneurs an established infrastructure and extremely high acceptance of the business model.
Advantage: Access to capital
Banks and financial service providers in the USA are well aware of the risks associated with franchises and traditionally find it easier to grant loans to franchisees. Multi-unit franchising – that is, operating several branches in succession – is standard practice in the USA and enables rapid financial growth. Many US states offer a very business-friendly environment, lower energy prices and tax incentives. America is regarded as the land of opportunity. This is partly because having a company headquarters in the US is tax-efficient.
Whilst the EU in Brussels is increasingly putting obstacles in the way of businesses, German entrepreneurs find open doors in the US: quality, ideas and courage are celebrated, not criticised as typically German – ideal opportunities for success.
In the USA, there is a wide range of franchise sectors, including: biotechnology, fintech, the agri-food industry, the automotive industry, telecommunications, tourism, dating services, real estate, agriculture, the digital economy, aeronautics and renewable energy. Some franchise models offer the opportunity to set up a business in other countries through an agency.
Whether in Europe or America, the profitability of a franchise business is determined by the balance between income and expenditure. The lower the costs are kept, the more positive the impact on profits. Achieving a sufficient return on investment is crucial for assessing whether franchising is worthwhile.
It is much easier for franchisees of a US company.
As the largest economy by far, Germany contributes the most to the European Union’s budget. Bureaucracy and regulation are harmful: uniform standards and lengthy legislative processes often result in a heavy bureaucratic burden for businesses and citizens. Lengthy decision-making processes: Unanimity requirements in certain policy areas complicate and delay swift, effective decisions. Loss of national sovereignty: Many laws and directives are adopted in Brussels, causing national parliaments to lose decision-making power.
The key economic and structural advantages of the US compared to the European Union lie in greater economic dynamism (GDP per capita), a single language and legal system, the global dominance of the US dollar, and a strong culture of innovation and venture capital.
Conclusion:
Whether you are a franchisor or a franchisee in the position of a US company: the advantages outweigh the disadvantages.