Franchising in Serbia by renata.vivien1


									                                                Universitiy of Novi Sad
                                                UNESCO Chair of
                                                Entrepreneurial Studies

                  Franchising in
                           Business concept for economic development
                         and development of entrepreneurship in Serbia

Goran Sečujski                                                           FTN
Miodrag Kušić (RE/MAX)                                   November 13th, 2007
     Franchising in Serbia

•   Franchising – terms and types
•   Franchising in Serbia – business concept
    for economic development and
    development of entrepreneurship in
•   RE/MAX – case study
 Part 1
 (terms and types)
                 1. Franchising
- Franchising – 4 issues:
     •   Economic issue
     •   Legal issue
     •   Franchisor issue
     •   Franchisee issue
                1. Franchising
         Franchising – Economic Issue

- The aim of presentation – how franchising could help
  economic development of Serbia
- Positive social-economic impacts of franchising
- Franchising – type of vertical cooperation
- Business concept on basis of cooperation between
  producers, wholesale and retail
                1. Franchising
               Franchising – Legal Issue
- Franchise agreement – the most important document
  to regulate relationship in franchising network
- First franchise agreements – up to 3 (three) pages
- Today’s franchise agreements – more then 50 (fifty)
- Franchise agreement – complex agreement (licence,
- In USA 70’s – The Code of Conduct
- UFOC (Uniform franchise offering circular) – general
                 1. Franchising
             Franchising – Franchisor and
                  Franchisee Issue
- Strategic decision
- Franchisor: decision to form franchise network,
  procedures, training, control, copyrights...
- Franchisee: decision to buy a franchise, franchise
  fee/royalties, level of franchisor control...
- Advantages and disadvantages
                      1. Frranchising
               Advantages and Disadvantages for
Advantages:                         Disadvantages:
• minimum capital                   • risk of independence tendency
• potentially high growth rate      at franchisee
• highly motivated and dedicated    • standard control
local management                    • no control over franchisee’s
• lower administrative costs        empleyees
• continuous protection of trade
• faster establishemt of national
brand. Destroys competition
                        1. Franchising
                Advantages and Disadvantages for
Advantages:                             Disadvantages:
• lack of knowledge compensated         • not completely independent
with training                           • constant compliance with the
• legaly independent company            agreement and standards
• lower risk of failure (comparing to   • ongoing financial obligations
strarting own business)                 (royalites, advertising fees)
• less starting capital
• use of brand name
• standard products and quality
• ongoing professional help
• group purchasing discounts
 1. Franchising
Common Terms

            Taken from An Introduction to Franchising
                 1. Franchising
                Common Terms

- FRANCHISE – from French word franchir which
  means privilege or rights.
- Definition – licence that gives franchisee rights to sell
  products/services of franchisor using franchisor’s
  trade/service mark and it’s business experience. For
  this rights franchisee is obliged to pay franchise
  fee/royalites and the franchisor has right to control the
  use of given rights.
                 1. Franchising
                 Common Terms

- FRANCHISING – contractural form of vertical
  marketing system in distribution
- Method of market expansion utilized by a successful
  business entity wanting to expand its distribution of
  services or products through retail entities owned by
  independent operators using the trademarks or service
  marks, marketing techniques, and controls of the
  expanding business entity in return for the payment of
  fees and royalties from the retail outlet. (Erwin J. Keup
  2004 ‘’Franchise Bible’’, Entrepreneur Press)
                 1. Franchising
                   Common Terms

- Franchise agreement – legal contract which tells
  franchisor to perform periodic deliveries and service
  activities, and to transfer its know-how to franchisee.
  The franchisee is obliged to pay fees and to perform
  according to contractual stipulations.
                1. Franchising
               Common Terms

- FRANCHISOR – legally independent entity which
  developed brand and unique concept due to business
  experience in an industry. This concept could be
  transfered to another legally independent entity.
- FRANCHISEE – legally independent entity that gets
  the right from the franchisor to do business under
  franchisor’s trademark, for which franchisee pays fee.
                1. Franchising
                Common Terms

  NETWORK – relationship between franchisor and its
                 1. Franchising
               Types of Franchising

1. Product distribuion franchising
2. Business format franchising
                 1. Franchising
        Product Distribution Franchises

- Isaac Singer & Singer Sewing Machine Company –
  second half of XIX century
- Dealership network
- Local businessman - exclusive rights to sell sewing
- First franchise agreement
- Coca-Cola, General Motors, Ford Motors...
                 1. Franchising
        Product Distribution Franchises

- Franchising of ‘’first generation’’
- Franchisee sells product using producer’s trade or
  service mark
- Soft drink distributors, automobile dealers and gas
- 1/3* of US retail through franchise units

                                               *1/2 of US retail - updated
           1. Franchising
     Business Format Franchises

- Most common type of franchise
- Franchisee sells products/services of franchisor using
  its trade/service mark and business concept
- ‘’Copy’’ capable concept
- Service sector – fast food restaurants, business
  services, maintenance, hotels, tourism, real estate...
           1. Franchising
Single-unit and Multi-unit Franchise

- Two other types of franchises
- International franchising
- Single-unit franchise – the franchisor grants a
   franchisee the rights to open and operate one
   franchise unit
- Multi-unit franchise
a) area development franchising
b) master franchising
           Part 2
(business concept for economic development
   and development of entrepreneurship)
         2. Franchising in Serbia
         National Franchise Networks

- Between 15-20 domestic franchise networks
- No evidence about exact number of franchise units
- Product distribution franchise – the most common type
  of franchise in Serbia
2. Franchising in Serbia
National Franchise Networks
2. Franchising in Serbia
National Franchise Networks
 2. Franchising in Serbia
International Franchise Networks
 2. Franchising in Serbia
International Franchise Networks
         2. Franchising in Serbia
       First Franchising Conference

- The First Franchise Conference – April 11th 2007
- Milan Parivodić, Slobodan Milosavljević, Michael Polt,
  William LeSante (vice president of Global Marketing
  Committee IFA)
- Subject: franchising basics, how to buy a franchise,
  how could franchise help Serbian economy
- Summary: franchising is not developed in Serbia
- AMCHAM & IFA offered help
            2. Franchising in Serbia
            First Franchising Conference

- Report Serbia: Franchising Market
- Serbia:
   •   One of the largest markets in the region – after Romania
   •   Increase in purchasing power
   •   Western products and services highly valued
   •   Local laws in compliance with EU laws
   •   No limitations for US franchises
         2. Franchising in Serbia
     Business Concept for Economic
          Development of Serbia

- Franchising is not a guarantee for success
- Serbia has advantages in agriculture and service
- How franchising could help:
   1) Cut unemployment rate
   2) Small retail shops under big supermarket chain
   3) New national franchises, spreading both nationaly
     and regionaly
       2. Franchising in Serbia
   Franchising and Unemployment

- High rate of unemployment
- Franchising advantages – avoiding begginers
  mistakes, no previous experience needed
- Higher success rate of franchisees compare to starting
  own business
- Serbia Development Fund – financing start-ups
        2. Franchising in Serbia
Small Retail Shops and Supermarket Chains

- Owners of small retail shop compete with strong
  competition (Rodić, Mercator, Delta, Metro...)
- Entering into franchise sistem (npr. DIS, DELTA
  MAXI/PEKABETA) small retail shops have advantages
  – group purchases, discounts, common marketing, no
  entrance fees
- If you can not win, join.
         2. Franchising in Serbia
           New Franchise Networks

- Everyone could name at least 1 national company that
  could be franchisor
- Advantages: market expansion in Serbia and in
  region, brand, employment
        2. Franchising in Serbia
       What are The Next Steps?

- Franchising in Serbia is obviously existing
- Franchise is not legaly regulated (it is only once
  mentioned in Antitrust Law)
- Franchising is not limited by any law
- Suggestion: promoting franchising (state agencies,
  banks, individual initiatives), establishing one national
  association, Code of Ethics
          2. Franchising in Serbia
               Something is Rolling...

- 2007 is turning point for franchising promotion in
   • First Franchising Conference
   • Rise of internet sites promoting franchising in Serbia
   • National Chamber of Commers published brochures and
     preparing seminars in 2008
         PART 3
            Mr. Miodrag Kušić,
Regional Manager for Serbia and Montenegro
                   3. RE/MAX
                   Case Study
- RE/MAX – leader in real estate market in USA,
  Canada and other competitive markets
- Established in 1973
- 121000 agents in 67 countries
- Sales over 1 million real estates for a year
- The best of the best
- The fastest growing franchises – 11th place; The
  most affordable franchises – 4th place; The best world
  franchises – 9th place
- In the book ‘’50 Companies That Changed the world’’
  by Howard Rothman

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