You might have chosen France as your company’s base because it’s your home country, or you were attracted to incentives offered by the government, such as the France 2030 recovery plan or support schemes that lower taxes and labor costs from 33 percent to 25 percent. But there comes a time when you want to take your company to the next level, and one way to do that is by setting up branches or satellite locations in other countries. Whether international growth is suitable for your company right now depends on multiple factors. To start, take a look at the benefits of growing a France-based company internationally and learn more about what’s involved in the process.
Is now a good time for companies to grow outside of France?
France has taken steps to make itself a more attractive country for businesses. President Emmanuel Macron declared that he wanted France to become a “unicorn nation” — a country attractive to startups and technology companies. To make France more appealing to businesses, the government has started to loosen some of its rules and restrictions. Additionally, the government is working to build a EUR 10 billion fund to provide financial support to companies.
While France’s new, business-friendly approach has its appeal, it can also lead to overcrowding, as more companies flock to the country and local business owners start new ventures. For that reason, if you have a France-based company, you might consider expanding to other markets. You may seek opportunities in neighboring European countries or in more distant marketplaces.
France’s bureaucracy is another reason to consider growing your company internationally. While the country has taken steps to make it easier for startups to get a foothold, there are still many obstacles for companies that want to grow. For example, France’s value-added tax (VAT) rate is 20 percent, higher than the average rate.
Companies based in France that want to grow have noticed a gap in the support they receive from the government, making international growth more attractive. For instance, reimbursement and financial support for companies performing research and development seem to be notably lacking in France. The country attracts businesses that are just getting started, but it seems unable to provide the support needed to take the next steps.
Fortunately for many France-based companies, other countries offer assistance. In some cases, surrounding nations have made bids for France-based companies, laying out the welcome mat through incentives and support. If your company is ready to take the next steps, looking at international programs and collaborations might be the perfect move for your business.
Why is expansion good for companies based in France?
Whether you decide to open a new location in a neighboring European country, set up shop in America, or head to Asia, there are several benefits to growing your France-based company. Here are a few reasons to pursue international growth:
- Connects you to new markets: Growing your company internationally lets you get a foothold into new markets. You can reach a broader range of customers when your company has more locations. For example, if you’re a France-based retailer, opening a new store in the U.S. lets you reach French expats living in the U.S. as well as American customers interested in your offerings.
- Enables you to diversify your products or services: International growth also allows you to get creative and diversify your company’s product or service offerings. If your company produces food or drink, you might be able to add flavors to your main product that appeal to residents of a particular area. Alternatively, you might make minor tweaks to your product to make it more appropriate for the climate or weather conditions of your target country.
- Creates more stability: When you gain a foothold internationally, you increase your company’s overall revenue stability. If things become shaky in France, you can lean on the other locations to keep your company afloat until things stabilize in your home country. Growing internationally gives you multiple revenue streams, which can help you weather periods of economic uncertainty.
- Invites international investments: Regardless of your company’s products or services, establishing in a new market can attract international investments. However, new investors might only financially contribute to your company if you set up shop in their home countries.
- Diversifies business markets: It could be that interest in your services or products is starting to dip in France. Growing into new countries provides you with more options. You can offer the same product in other European countries, Asia, Africa, or the Americas as you do in France, or you can adjust as needed. Having multiple options and market routes can increase your company’s life span.
- Connects you to new talent: Global growth often means access to international talent. When you establish in new countries, you can hire people within those places. You suddenly widen your applicant pool considerably, which means you’re more likely to find the perfect fit for your company.
How to expand your France-based business globally: countries to consider
Where should your France-based company move first? When considering growing your company internationally, the number of options can be overwhelming. Take a look at a few recommended regions for France-based companies:
1. Germany
France and Germany have a close partnership and relationship. The two countries’ connection dates back to the Élysée Treaty, which was signed in 1963. In 2019, President Macron and German Chancellor Angela Merkel signed the Treaty on Franco-German Cooperation and Integration, which expanded on the 1963 treaty.
Most critically, France and Germany are each other’s primary trading partners. Germany imported nearly EUR 70 billion worth of services and goods from France in 2019 — and exported more than EUR 84 billion worth of goods and services to France.
If you were to grow your France-based company in Germany, you wouldn’t be alone. France-based companies with a German presence account for 30 percent of companies operating abroad in the Eurozone. There are 2,737 France-based companies in Germany, and those companies employ 363,000 workers.
2. The Netherlands
France also has a close relationship with the Netherlands. France is the third-largest country for foreign direct investment in the Netherlands. Likewise, the Netherlands is the second-largest stock investor in France.
Currently, 1,350 France-based companies operate in the Netherlands. The companies are primarily in the energy, agrifood, and transportation industries. All told, France-based companies employ 129,800 people in the Netherlands.
In 2020, the two countries created an initiative to strengthen trade relationships, making the Netherlands a top pick for France-based companies that want to grow internationally. The proposal focuses on sustainable development, specifically working on joint goals for corporate responsibility and adhering to the Paris Agreement.
3. The United Kingdom
Although Brexit has made France’s relationship with the UK somewhat more complicated, the two countries generally have a good economic relationship, with mutual investments. In 2017, France had 131 foreign direct investment projects in the UK, creating more than 8,000 jobs.
Many France-based companies have set up shop in the UK, ranging from large companies to small startups.
4. Italy
France and Italy are founding members of the European Union (EU), which has helped cement a strong relationship between the two countries over the past decades. Their relationship is supported by an annual summit that takes place in either France or Italy.
France is one of Italy’s primary suppliers, leading investors, and second-largest customer. In turn, Italy is among France’s top three customers. In 2017, France had foreign direct investments in Italy worth more than EUR 66 billion.
5. Spain
France and Spain share a border as well as views on the future of Europe. The two countries have a close relationship due to a strong desire to increase cooperation regarding the EU’s future. Since the Treaty of the Pyrenees was signed in 1659, France and Spain have created more than 370 treaties, agreements, and bilateral conventions together.
The two countries are also close economically. France is Spain’s top economic partner and is the fourth-largest investor in the country. There are more than 2,000 subsidiaries of France-based companies operating in Spain, which have created over 300,000 jobs.
6. The U.S.
The U.S. has a long history with France that dates back to the American Revolutionary War. The two countries signed their first trade agreement, the Treaty of Amity and Commerce between the U.S. and France, in 1778. Over the past 250 years, France has remained close to the U.S. mainly due to shared values and similar political and economic policies.
Trade between the U.S. and France amounts to USD 139 billion annually, with transport equipment making up nearly half. France also exports a large number of luxury goods, agrifood, and aeronautics to the U.S. For research and development, France-based companies have invested a significant amount in the U.S.
Many companies based in France, such as Airbus, Sodexo, and Michelin, have become household names in the U.S.
How to expand your France-based company internationally
Before growing your France-based company internationally, you should create a road map and have a general idea of where you’re going and what you’ll do once you get there. Following these steps can help make international growth go as smoothly as possible for your company.
- Research countries: The first step is to choose a country. You can pick a country based on its existing relationship with France or customer demand for your product or services. It can also be worthwhile to consider any roadblocks the country might have that can make it challenging for international companies to get a foothold. Some governments are very welcoming to international companies, while others are much less accommodating.
- Understand the cost: Consider the cost of establishing a subsidiary in a new country. How many new employees will you need to hire? How much will you have to pay for rent in the new country? Also think of the cost of advertising in the new location — to recruit employees and to promote your company’s new presence. Compare the price of getting established in a new country to the risks involved. If your company has a good chance of success, it can be worth the expense. But if there are countless obstacles or a long history of unsuccessful companies, then it might not be a financially sound move.
- Perform market research: Another thing to consider before you grow your company internationally is if there is potential in your chosen country’s market. Market research can help you identify areas where there is demand for your products or services or can help you uncover potential opportunities. It can also give you an idea of how knowledgeable people are of your brand in your target country. For example, people in the UK or Germany might already know what you do, which can give you an advantage when making inroads into those areas.
- Look for investors: You might need financing to grow your company. One valuable source of funding is investors. Look for local investors interested in what you have to offer and who want to support international companies in their country. Also, look to see if the target country’s government provides programs for France-based companies or other international companies that want to move into their country.
- Learn tax rules: Every country has its own tax rules, and you need to understand your legal obligations before establishing a presence in a new location. In some cases, a country’s tax structure might make you reconsider setting up in that region.
- Know the business rules: Learn about what is expected of your company in the new country. Will you need to register your company and get a license? Some countries have more complicated processes than others, affecting how long it takes you to get set up. It can be worthwhile to consider working with an Employer of Record in your country of choice, such as Globalization Partners. An Employer of Record can get your company up and running in a new location in just days rather than weeks or months.
- Understand employment laws: Even in countries within the EU, there might be subtle differences concerning employee rights and employment laws. An Employer of Record can manage your payroll and employee onboarding, ensuring that you’re compliant with the local laws.
Globalization Partners can help you grow your France-based company
If you’re ready to take your France-based company to the next level and achieve international growth, Globalization Partners can help. We offer Employer of Record services in more than 187 countries and can quickly get your company up and running in a new country. We’ll also manage your entire HR process, including payroll, ensuring that your employees get paid on time and that their paychecks comply with their home country’s regulations. Request a proposal to learn more.
