How Do You Open an IKEA Franchise?

While the Swedish furniture retailer IKEA is technically a franchise, investment opportunities are not available to the typical type of individual entrepreneur or small organization common to franchising. To open an IKEA franchise, large ownership groups invest significant capital — upwards of $100 million for each location — and agree to manage all of the stores in a specific country.

For example, 370 of the 420 global IKEA stores are franchised to INGKA holding, which is owned by the Stichting INGKA Foundation and is responsible for all of the IKEA stores in the U.S., Europe, Japan, China and Australia. The Al-Futtaim Group operates four stores in Egypt, Qatar and the UAE, while Dairy Farm owns the rights to open and operate stores in Hong Kong, Macau, Indonesia and Taiwan.

> Potential IKEA franchisees are evaluated by Inter IKEA Systems B.V. If chosen, an agreement is signed that grants the franchisee the right to operate an IKEA store and/or other sales channels in accordance with the IKEA franchise systems and methods. IKEA franchisees pay Inter IKEA Group an annual fee of 3% over their net sales. In return, they get access to the IKEA trademarks. They are also authorised to market and sell the IKEA product range and operate IKEA stores and other sales channels.

When selecting franchisees, Inter IKEA Systems B.V. prioritizes the following characteristics:

• Thorough retail experience

• Extensive local market knowledge and presence

• Corporate culture and values

• Financial strength and ability to carry through the investment penetrating a country in full and in a large-scale retail environment format

Since IKEA does not utilize a traditional franchise model, the rights to particular regions will vary in cost. When the company announced its intention to build a total of 25 stores across India in 2012, for example, it noted the development would require a $1.9 billion investment and a 15 to 20-year timeframe.