Franke Holding AG

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Franke Holding AG

Dorfbachstrasse 2
Aarburg
Switzerland
Telephone: +41 062 787 31 31
Fax: +41 062 791 30 37
Web site: http://www.franke.com

Private Company
Founded: 1911
Employees: 7,500
Sales: CHF 1.63 billion ($1.32 billion) (2004)
NAIC: 332322 Sheet Metal Work Manufacturing; 332999 All Other Miscellaneous Fabricated Metal Product Manufacturing

Franke Holding AG is one of the world's leading producers of kitchen and related systems and equipment, including washroom and sanitary facilities systems. Franke products span the range of customer sectors, including the household and semi-professional market, and the professional restaurant, catering, and hospitality sectors. Among other customers, the company is a leading supplier of kitchen and other systems for McDonald's restaurants worldwide. Franke's operations are grouped around three core divisions: Kitchen Systems, including the group's historical production of sinks, as well as water tap and waste treatment systems, food preparation surfaces and work tops, and the like; Washroom and Sanitary Facilities, including paper towel and soap dispensers, toilet paper holders, as well as toilets, shower installations, and sinks for the consumer, commercial, professional and industrial markets; and Franke Coffee Systems, grouped around subsidiary Franke Kaffeemaschinen AG, which develops and manufactures coffee machines for the professional and semi-professional markets. Based in Aarburg, Switzerland, Franke has expanded to include more than 85 companies throughout Europe, North and South America, Asia, and Africa. The privately held company is led by Michael Pieper.

Sink Success in the 1930s

Franke started out as a small sheet metal plant, founded by Hermann Franke in 1911 in Rohrschach, Switzerland. Franke struggled throughout his first decade in business, however, in large part because of materials shortages brought on by the outbreak of World War I in 1914. The difficult economic climate in Switzerland continued to plague Franke's business into the next decade. Yet the growth of Switzerland's economy, stimulated by its liberal banking policies, in the 1920s offered new opportunities for Franke's business. The company began focusing its production on the construction sector, producing its first sanitary systems and fittings such as skylights and window frames. Another product line, tops for ovens, brought the company into the kitchen as well.

By the 1930s, Franke had begun to explore new materials as well, leading the company eventually to specialize in the production of stainless steel equipment. The 1930s also marked the emergence of a new core operation, that of the production of kitchen sinks, launched in 1931. This activity played a major role in the company's growth into not only a leading producer in Switzerland, but on a global level as well. By the end of the century, the company claimed to have produced more than 50 million kitchen sinks.

Into the 1930s, however, Franke remained a small business, with just ten employees. In the middle of the decade, the company moved to larger facilities in Aarburg. Franke then began developing a new generation of sink, a fully welded and smoothed sink. The company successfully launched the new sink type in 1937.

The end of the decade presented new difficulties for the company, however. Founder Hermann Franke died in 1939. With son Walter Franke taking the leadership, the company then faced into the outbreak of World War II. Once again, the company was faced with severe materials shortages. Yet the difficult conditions led the company to branch out again, and during the war years Franke began producing a more complete range of kitchen and sanitary equipment.

Fast-Food Expansion in the 1970s

By the end of the war, the company had grown to include more than 100 employees. The first stirrings of the postwar European economic boom encouraged the company to invest for future growth, with expanded production facilities and a steadily expanding range of products. By 1949, the company had more than doubled its payroll and had launched production of entire kitchen systems. Sinks remained a central point in the group's production, and the Franke name became associated with the most advanced sink design developments.

The construction boom occurring across Europe, as the continent rebuilt and modernized its cities following the war, presented still greater growth opportunities for Franke into the 1950s and 1960s. Demand for sanitary installations and systems was particularly high, as that market evolved rapidly in the postwar years. Private, in-house bathrooms, showers, and toilets now became the norm in many markets where previously they had been unavailable; public and communal washroom facilities also were modernized. The rapid growth of the sector led Franke to develop a dedicated Washroom and Sanitary Equipment product group into the 1950s. By the end of the decade, the company's product offering spanned the complete range of washroom equipment and fittings.

Meanwhile, the construction boom occurring elsewhere in Europe, and the strong demand for the company's state-of-the-art kitchen and washroom equipment, attracted Franke's expansion interest. The company began adding its first international components in the 1950s, starting in Germany in 1955. Over the next decades, the company added operations throughout Europe, entering Italy in 1963 and France in 1964, among other markets. By the early 1970s, the company had added 12 foreign subsidiaries. During this period, the company expanded strongly, boosting its number of employees from 750 at the start of the 1960s, to more than 2,500 into the 1970s.

A major milestone in the company growth came in 1972. When McDonald's began to expand its restaurant empire into Europe, it turned to Franke to provide much of its kitchen equipment. The company's relationship with McDonald's quickly expanded, and the company became a major provider to the fast-food giant worldwide. The company's expertise in this area also brought it contracts from many of McDonald's competitors, including Burger King. Nonetheless, McDonald's remained one of the company's largest customers, accounting for a significant portion of the group's annual sales—nearly 20 percent into the 2000s.

Coffee Equipment Extension in the 1980s

Franke added the production of colored enamel-coated sinks in 1973, in part to accommodate shifting consumer trends. The company also responded to the needs of the professional and commercial markets, developing its so-called compact sink system. Introduced in 1979, the compact sink system added to Franke's standing as one of the world's leading sink producers. By then, the company was under the direction of Willi Pieper, a friend and business partner of Walter Franke, who took over the company after Franke's death in 1975.

Under Pieper, the company's growth continued. In the early 1980s, the company became interested in expanding beyond its kitchen and sanitary systems operations. The company's target fell on the promising professional coffee machine sector. Always strong in its European base, the sector was undergoing something of a revolution in the United States, where the appearance of the first Starbucks in the early 1980s inspired a new appreciation for gourmet coffees.

In 1984, Franke acquired century-old coffee machine producer Augsberger. The company's intention was to redevelop its new subsidiary, now called Franke Kaffeemaschinen AG (later known as Franke Coffee Systems in English), into a producer of high-end, high-tech coffee machines. The rapid success of this subsidiary led the company in 1988 to restructure its operations into several core divisions, including Kitchen Systems, Washroom and Sanitary Facilities, and Coffee Systems.

The restructuring prepared Franke for a new period of strong growth. Led by Michael Pieper, son of Willi Pieper, who took over as group CEO in 1989, the company began transforming itself into a truly global operation. Over the next decade and half, the company entered most of the major world markets. By 2005, the company counted some 85 subsidiaries worldwide. Acquisitions formed a major role in the group's expansion. In 1990, for example, Franke expanded in the United Kingdom through the £8 million purchase of Carron Phoenix.

Global Leader in the New Century

The collapse of the Soviet system and the newly liberalized markets in Eastern Europe presented a fresh opportunity for growth close to home. Franke began expanding into the Central and Eastern European markets through the 1990s and into the 2000s. The company turned to Poland, in 1993, establishing a subsidiary in Warsaw. Franke also entered Russia that year, and then established operations in Hungary in 1994. Closer to home, the company established a dedicated subsidiary for the Portuguese market in 1995.

Company Perspectives:

Ours is a permanent quest for perfection, one to which we lend all our strength, intelligence, imagination, passion, heart and soul. Here is a summary of our core values: Leadership: We are among the pioneers in our industry and strive to achieve a leading position. Performance-oriented: We invest a great deal in the quality of our business processes and the skills of our employees.

Solution expertise: We continuously develop appropriate time-to-market solutions. Quality: We are committed to delivering Swiss quality. Our appliances function longer, more precisely and more reliably than the industry average.

Proximity to customers: We help customers find solutions, which makes us an important contributor to the achievement of their goals. Innovation: We continually surprise and delight with innovative solutions that set the standard for our industry. Values: Our appreciation of quality and performance is all-embracing. It encompasses—but is not limited to—the quality, functionality, design and performance of our products. Quality comes out in all that we do.

Yet Franke's expansion continued beyond Europe. In 1995, the company entered mainland China, establishing a presence in what was soon to become the world's fastest growing economy. In 1997, Franke boosted its presence in South America, launching a local subsidiary in Brazil.

Further international growth led the group into Bulgaria in 2000 and Thailand in 2002. The company also acquired a presence in South Africa, through its purchase of City Metal Products (CMP), formerly part of Boumat Ltd. The addition of CMP, renamed as Franke South Africa, placed Franke as the leading manufacturer and distributor of sinks and sanitary products in that country. In 1999, the company bought out its joint venture partner in China. The following year, it established a new subsidiary in Makati City, in the Philippines.

By the beginning of the 2000s, Switzerland, which had accounted for more than 40 percent of the group's sales a decade earlier, had been reduced to just 15 percent. For the new century, the company launched a restructuring operation in order to focus on just three core divisions: Kitchen Systems, including its washroom and sanitary business; Contract Manufacturing, for McDonald's and others; and Coffee Systems. As part of its restructuring, the company sold off parts of its diversified operations, which included industrial technology and automotive equipment. In 2003, the group's restructuring included the sale of its bathroom furniture subsidiary in a management buyout.

The streamlined group now launched a new series of acquisitions in order to boost its core operations. Franke's Coffee Systems division proved particularly active in its bid to acquire scale. In 2001, the division acquired KAMA Kaffeemaschinen & Service, based in Worb, Switzerland. The following year, the company moved into the top ranks of coffee machine producers, buying up Germany's Bremer. In 2003, the coffee systems division moved into The Netherlands, buying up KO-ks Benelux B.V. This was followed by an entry into the United States in 2004, with the purchase of ESI, based in Seattle. That subsidiary was renamed as Espresso Specialists Inc.

Other acquisitions included Niggemann Food Service Technik in Bochum, Germany, acquired in 2000, boosting the group's contract manufacturing operations for the fast-food restaurant market in Germany and Europe. The company moved into Denmark at the end of 2001, acquiring that country's A/S Panda Stal, a manufacturer of sinks. Although a small company, at just EUR 3 million in sales, the Panda purchase provided Franke with a beachhead for further expansion in the Nordic market.

In 2002, Franke took the leadership position in the European stainless steel sanitary product market through its acquisition of W&G Sissons Ltd. The purchase of W&G Sissons, which also gave the company operations in Belgium, followed on the company's decision to form a new dedicated Washroom & Sanitary Equipment division as a subdivision of its Kitchen Systems division in 2002.

Franke returned to the acquisition drive in 2004, buying up 49 percent of Italy's Faber Group. Specialized in the production of hoods and extraction systems for ovens and stoves, Faber claimed a position among the global top three in that category, with production plants in nine countries, and sales of more than EUR 250 million. In 2005, Franke bought up full control of Faber.

The company turned to South Africa, buying water heater manufacturers Supa Heat Geysers and the Geyser Company, gaining a market share of more than 35 percent in that country. By October 2005, Franke had reached an agreement to acquire AquaRotter, a subsidiary of Grohe based in Germany. As it neared the end of its first century, Franke had grown from a small sheet metal workshop into a leading globally operating company.

Principal Subsidiaries

Espresso Specialists Inc. (United States); Franke (Thailand) Co., Ltd.; Franke Douat Ltda. (Brazil); Franke France S.A.S.; Franke Kitchen Systems (Pty) Ltd. (South Africa); Franke KS International; Nortesco Inc. (Canada); NIRO-Plan AG.

Principal Competitors

DHS-Dillinger Huette Saarstahl AG; Aktiengesellschaft der Dillinger Huettenwerke; Independenta S.A.; Permasteelisa S.p.A. (Italy); Huta Florian S.A. (France); Scott Company of California Inc. (United States); Karl Steiner AG; Teich AG.

Key Dates:

1911:: Hermann Franke opens a sheet metal workshop in Rohrschach, Switzerland.
1931:: Franke launches production of sinks.
1936:: The company moves to Aarburg and opens a larger production plant.
1939:: Hermann Franke dies and son Walter Franke takes over as head of the company.
1950:: The Washroom and Sanitary Equipment division is launched.
1955:: The company launches its first international expansion, into Germany.
1972:: The company begins contract manufacturing for McDonald's.
1975:: Willi Pieper takes over the company after the death of Walter Franke.
1979:: The compact sink system is launched.
1984:: The company acquires Augsburger and enters production of coffee systems.
1993:: The company enters Poland and Russia.
1999:: The company acquires full control of a Chinese joint venture.
2002:: W&S Sutton in the United Kingdom is acquired.
2004:: The company acquires ESI in the United States.
2005:: The company acquires AquaRotter from Grohe.