La Vie Impossible

Paris is encouraging entrepreneurs even as it continues to hinder them

France's government wants the world to know something. According to official figures, French citizens created a record 322,000 companies in 2005 -- and they're setting a similar pace this year. Is France, which invented the word "entrepreneur" but has been famously hostile to the breed, finally helping small-business people thrive?

Yes and no. The state has been trying to sweep away many of the outdated laws and regulations that have made life complicated for small-business owners. But French entrepreneurs continue to face cultural, bureaucratic, and financial hurdles. Even the government acknowledges that most businesses created each year are tiny, with scant prospects for growth. Says Philippe Bloch, co-founder and former chief of Columbus Café, a chain of espresso bars in and around Paris: "You have to be crazy to be an entrepreneur in France."

To outsiders, France can be a baffling place. Yes, it is a modern, postindustrial country. But since at least Louis XIV, the government has wielded enormous, even stifling, power. At the same time, the country still breathes in the spirit of the French Revolution, mythologizing the virtues of peasants and factory workers, even if few of them remain.

Caught in a sort of no-man's-land between the powerful state and the heroic worker is the small businessman. It's not always a pleasant place to be. "In France, a self-made man is viewed as a sort of scoundrel or gangster," says Francis Holder, the 66-year-old founder and CEO of Holder Group, an industrial baker that supplies McDonald's Corp. in France and operates a chain of more than 300 boulangeries in Europe, Asia, and the U.S.

Holder's experience is instructive. The son of a poor baker, he overcame enormous odds to build his business. He worked 18-hour days, endured several near-death business experiences, and was forced to be much more competitive than the culture generally tolerates. Were Holder in America, he would be feted as a classic up-by-the-bootstraps success story. Not in France. Despite creating thousands of jobs, Holder remains an outsider in the clubby world of French business and politics. "In France," says Holder's son Maxime, "a soccer star scores a goal and gets the Legion of Honor. My father is not likely to ever get it."

If Renaud Dutreil had his way, people like Holder would be accepted and even celebrated by their countrymen. Dutreil is Minister of Small & Midsize Enterprise. Before his arrival in 2002, the ministry was a backwater. But Dutreil, 46, is quite unlike his predecessors. He remembers the humiliation he felt as a teen when his father's tannery went bankrupt. And he has set out with a passion unheard of in France to help small businesses.

Dutreil's achievements so far will seem banal to an American. For example, he ditched a law that had made it illegal to run a business from home. He also led the charge to cut taxes, ease financing requirements, and lighten bankruptcy penalties. And to help boost animal spirits in a nation where fear of failure is endemic, Dutreil has twice crisscrossed France in a special train to meet with entrepreneurs. He says the reforms have helped cut the jobless rate from 11% to 9%. "By most countries' standards, we're doing nothing original," he says. "But for France, creating a culture of growth is very new."

BEWARE THE CODE

Problem is, there's only so much Dutreil can do to restrain the heavy hand of the state. His power does not extend to the infamous Inspection du Travail. The agency, whose origins date to Napoleon, was set up to ensure that companies aren't exploiting workers. Today, some 2,000 inspectors troll the business byways of France looking for people who are working too hard.

A couple of years ago, Columbus Café founder Bloch ran afoul of the Inspection du Travail and found himself in criminal court. An inspector had noticed that one of Bloch's managers had worked 10 hours longer than the state-mandated 35 per week. The fact that she was filling in for no-shows didn't matter. Bloch, now 47, was found guilty of "obstructing the duties of an inspector" and slapped with a suspended fine of 2,000 euros (just over $2,500 at today's exchange rate). "I was sitting between two guys, one charged with killing three people, and [one] charged with raping his secretary in the parking lot," he recalls. "I said to myself, 'What the f--- am I doing here?"' French officials say the laws protect workers. Still, they concede that the Inspection du Travail can come on a little strong. Says French Budget Minister Jean-François Copé: "Our people are sometimes aggressive."

Then there's the massive 2,732-page Code du Travail. The laws are so complex that even small companies spend thousands of hours a year ensuring that they are in compliance. Augustin Paluel-Marmont, 30, runs Michel et Augustin, a maker of cookies and breakfast snacks that's loosely modeled on Ben & Jerry's Homemade Inc. (UL ) Despite having just seven office staffers, he employs a full-time head of human resources who spends his days running around Paris trying to locate official forms and then filling them in. Says Paluel-Marmont: "Your first hire must be a human resources manager, or you're dead in the water."

If the overweening state doesn't drive French entrepreneurs to distraction, the business Establishment might just finish the job. Amélie Faure, CEO of Pertinence, a small software company that helps the likes of Wyeth (WYE ), BMW, Airbus, and Siemens (SI ) boost manufacturing efficiency, says dealing with her own countrymen can be maddening.

After agreeing to buy her products, the subsidiary of a French aerospace conglomerate failed to pay on time. A lengthy renegotiation ensued, and at the end of six weeks of haggling, Faure, 42, walked away. "They spent months trying to get us to lower our price by 10,000 euros," she says. "But every month they had our product would have saved them 200,000 euros. This was very stupid and frustrating -- a real waste of time."

In the end, many French with entrepreneurial yearnings jump ship. Every year, thousands of France's most promising youth decamp for London, New York, Silicon Valley, and beyond to seek their fortunes. They may vacation at their families' country houses in Normandy, Brittany, or the Côte d'Azur. La belle vie, after all, will always be in France. But their business dreams, they figure, will come true more easily far from the reach of the Inspection du Travail.

By Eric Schine

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