Opportunities in Poland
Poland is one of the fastest growing economies in Europe which is confirmed by various market indicators such as Gross Domestic Product, Consumer Price Index, structure of the labor market, competitive wages, and dynamic foreign trade exchange. With GDP growth of 6% for the second quarter of 2007 (3.2 % in 2006), Poland is developing much faster than the Euro zone (1.3%) and higher than the average of all 25 EU members.

According to a major survey in 2007, the main reason for investors to enter Poland is cost and time effectiveness. Costs of conducting business in Poland are significantly lower than in Western Europe. Also the labor costs are very optimistic for foreign investors. Since 2001, wages in Poland have been increasing slowly due to marginal unemployment. As a result, the wage level in the Czech Republic and Hungary is now higher than in Poland. (Average monthly wages in the enterprise sector in Poland was €490). According to Cushman & Wakefield Cities Monitor, Warsaw is the best capital city in Europe in terms of payroll costs for workplace staffing. Also, the time required to start up a company is much shorter than in other countries. According to the World Bank, the estimated time required to start a business in Poland is 31 days, in Hungary it is 38 days and 40 days in Czech Republic.

Franchisors have found fertile ground in the Polish markets, having surpassed neighboring countries in the favorable factors that attract such new business ventures. Poland’s capital, Warsaw, is among the choicest epicenters for growth in quick service restaurants, clothing, ’street’ food and production/manufacturing.

“Any franchise ignoring the prosperity available for expansion into Poland is just throwing money away,” says one EU franchise consultant, “It’s just one of those opportunities you can’t pass up.” While most consumers are more than delighted at the influx of new offerings popping up in Poland, they are eager for the greater stability in the job market, and simply greater diversity in the jobs available. Learn More >>

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Popularity: 21% [?]

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The world’s biggest retailer doesn’t give up the idea to enter Russia
Wal-Mart has officially admitted that it doesn’t give up the idea to enter the Russian market. Furthermore, the world’s biggest retail group still thinks that the best way to do it is by taking over major national retailers in Russia. For example, the retail chain Lenta.

Interviewed last Thursday by Bloomberg Wal-Mart’s finance director Charles Holley said the company still considers an opportunity to enter the Russian market.

At the beginning of April one of the major Russian business newspapers Kommersant announced that Wal-Mart was negotiating a deal with the Russian retail chain Lenta. Wal-Mart was willing to acquire 51% of the company’s stock after it was revealed that Lenta’s founder Oleg Zherebtsov decided to sell his 35% stock share. Originally, Wal-Mart wanted to buy his shares but then decided to do it only together with any other deal of the same kind in order to obtain the controlling stock. The deal failed as other Lenta’s co-owners refused to sell their stocks.

Charles Holley comments on the situation: “Russia is a growing market and it is still not packed with well-organized retailers. We can apply all our potential here in terms of merchandising, pricing and saving customers’ money. It will allow us to feel comfortable in the market.”

Wal-Mart has to look for new markets because the areas of its traditional presence have ceased to grow. According to the company’s recent report, from the beginning of February till the end of April the world sales for Wal-Mart shrank by 11% down to $21.3 billion. The losses were caused by the exchange difference. If not for the strong dollar, Wal-Mart’s gain would have increased by 9.1%.

New markets are absolutely essential to the company. And one of the higher-priority regions is Russia. “We do not deny that Russia is still of a big interest to us,” says Mr. Holley repeating Wal-Mart’s previous statements. “In the broad sense of the word the company looks for further expansion both in the areas of its presence and in new markets.” Lenta’s spokesperson refused to comment on the situation.

UBS analyst Neil Currie reported that Wal-Mart can be first of all interested in a well-known brand and customers’ loyalty. And Lenta can provide both. Obtaining a major national retailer’s controlling stock falls in line with the Wal-Mart’s development strategy. For the last years Wal-Mart preferred to invest into other retail chains abroad rather than establish its own stores from scratch, emphasizes Mr. Currie.

Wal-Mart’s entering the Russian market has been widely announced in mass media. But none of the rumors about the results of the retailer’s expansion have turned out to be true so far.

Popularity: 34% [?]

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Ensure Your Franchise Success
To be successful in a franchise business, you must be willing to do certain things to ensure that success. Franchises are unique in that you are taking a product and service that the franchisor has formulated — and to some extent already proven successful — and starting a “new” business of your own. This requires that you maintain a good relationship with your franchisor, find the best business location, develop a marketing plan, take care of financial matters, and manage your resources. Franchises that fall short in one or more of these areas are often the franchises that fail.

Maintain a Good Franchisor Relationship
While most of the time the franchisor helps the franchisee, there are times when the relationship with the franchisor can become a hindrance. A constructive franchisor-franchisee relationship is more often than not the key to a successful franchise business.

If the franchise has a poor relationship with the franchisor, and/or gets little or no assistance from it, then the business’ chances for success diminish considerably. Many large franchises, such as McDonald’s, weed out any franchisees that don’t follow the franchisor’s prescribed standard. This standardization is often what makes these companies a successful franchise business in the first place. If the business model as outlined by the franchisor is not easily duplicated, the chances for success may decrease.

Find the Best Spot to Set Up Shop
One way to improve your chance of success is by finding the best real estate for your franchise. Busy streets or crowded malls are preferable in comparison to the rural wilderness of Outer Mongolia. Many franchises have failed by choosing the wrong location, and many have succeeded from staking their claim to the right place at the right time.

Another important factor is the area of protected territory you are granted by the franchisor. A study by the Institute for Operations Research and the Management Sciences (INFORMS) showed that 91 percent of successful new franchises had been granted exclusive territory in their contracts. For the same period, a revealing 31 percent of franchises that failed were not given exclusive territory, and thus were prey to encroachment by other shops that siphoned off potential customers.

Develop a Marketing Plan
Within franchises, advertising is almost always the domain of the franchisor. Typically, what happens is that franchisees are required to contribute to an advertising fund that is then used by the franchisor to promote the product and/or service.

Marketing problems usually stem from a bad product and/or service, no market share or customer base, too much competition, and poor advertising. Developing a marketing plan is the best way of bringing to light any inherent marketing problems that your new franchise might have.

Take Care of Your Finances
A primary reason why franchise businesses fail is that new franchise owners go into business lacking the funds to meet their startup and operating expenses. The best way to anticipate these costs is to develop a solid business plan early in your process so that you have a realistic idea of the money you will need to start your new franchise.

Because it is often a “known” product, the franchise brand is normally a benefit to a franchisee. But if the product or service is simply a bad idea, no amount of marketing and financial backing is going to make the franchise a success.

Manage Your Resources
Savvy franchise management involves using all of your resources to their optimum. This starts with you and trickles downward from there.
In addition, hiring and managing employees so that they reflect your business in a positive way is one of the best ways to improve your business. If your customers are satisfied with your product and service, they will come back for repeat business. It’s not about the revenue gained from each customer, but rather the profits from your entire customer base over the next several years.

Popularity: 20% [?]

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The United Kingdom often seems the logical place for overseas franchisors from English-speaking countries to begin their European expansion. The language is similar. There is a well-developed franchising community that is supported by the lending banks. There are an array of experienced legal and practical advisors, and a wide choice of franchise and small business magazines and exhibitions in which to promote the opportunity. Once established in the UK, the business then has a natural springboard into mainland Europe.

One of the first questions to be answered is what should be the entry strategy? Naturally most franchisors will eventually be looking to duplicate what they do in their home market - that is, set up a network of sub-franchisees, which will often be recruited and managed by a master franchisee. Of course, there are other structures available. For example, the franchisor can set up an owned subsidiary to also become the franchisor within the new country/market. Alternatively, the franchisor can appoint an area developer who only opens and operates owned units. But master franchising with sub-franchisees is often the preferred option for most businesses who franchise in their home country.

An increasing trend involving international franchisors, from countries that are much larger geographically than the UK, is to appoint regional master franchisees, who in turn subfranchise or appoint actual operating franchisees. Whilst there is no reason why this strategy shouldn’t work in practice in the UK [if it works in the home country], there are problems - not least with the approach taken by The British Franchise Association (BFA). Unlike many national franchise associations, the BFA have strict membership criteria for applicant franchisors. In instances where a number of different entities are going to recruit franchisees into a system the BFA requires them all to individually meet those criteria. Furthermore, if one does not qualify, or chooses not to apply, then none can be BFA members. This will cause problems as nearly all the lenders and franchising media recommend that potential franchisees only consider those businesses that are members of the BFA. Local advice on how best to structure your entry to the UK is therefore important.

Whatever the chosen structure, the proposed network will be much better received by the UK franchising community if it is properly pilot-tested and proven before sub-franchisees are appointed. Overseas franchisors are often surprised by the conservative and cautious attitude displayed by potential UK franchisees. They will look for a proven business format, for which some credible market research has been undertaken, and which is professionally presented. English people are not generally as entrepreneurial and willing to take a gamble as is often imagined and will take a long time to examine an opportunity before deciding to go ahead. However, once committed they will give it all they’ve got to make it succeed.

The good news is that the UK has no pre-contract disclosure laws. Indeed there is no specific franchise legislation whatsoever. Joining the British Franchise Association requires submitting to a detailed accreditation process as does exhibiting at any of the British franchise exhibitions. Both organisations are keen to raise the standard and quality of franchisors rather then simply go for large numbers.

One of the most surprising things for businesses with premises-based franchises when they first come to the UK is the cost of real estate and the difficulty and time involved in actually securing the lease to premises. As a general rule expect sites to be a lot smaller, rents to be considerably higher and for it to take a lot longer to secure occupation rights. Taxation and labour laws will also be different and all these things have a bearing on how successful the transfer of the business format is likely to be. When the move is made into mainland Europe everything will change again - often in each country!

The most frequently asked question is “how much can we charge for upfront and ongoing fees? As usual, there is no “right” answer and it depends how badly you want to be here, how much you want that franchisee, or how much that franchisee wants your brand and system. Establishing the fee structure which is right for a particular business in a particular market is one area where local professional guidance is invaluable.

One area of franchise development where the UK led (and probably still leads) the world is the presence in nearly all the major banks of dedicated franchising sections which keep tabs on all the operating franchisors. Banks here love lending to franchisees because it is proven to be a much safer form of small business lending for them - providing of course the franchise has been properly set-up and structured in the first place or, if it is an incoming system, that the appropriate research has been done. There’s that good old UK conservatism again.

Popularity: 18% [?]

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Our new series, the Winner’s Circle Profile, seeks to better understand the market climate in Eastern Europe regarding franchise growth by focusing on the very entities that are creating that market. By examining those companies which are decidedly enjoying a great margin of success in entering international franchise ventures or otherwise expanding through international franchise growth avenues, we can realize the real profit potential.

This week’s profile subject is Romstal. Founded in 1994, Romstal is one of the largest sanitation equipment franchises in eastern Europe, commanding over 200 stores which raked in an estimated $800 million in 2008. Exceprts from news articles around the web indicate that Romstal is actively and swiftly expanding, with four new stores already opened this year and still 50 more new units in the works.

According to statements, Romstal will ambitiously further the drive by opening new franchise units in Russia, Romania, Bulgaria, Ukraine, Moldova, and Serbia. The new locations opened in Russia and Ukraine have a gross surface of 150 square miles, including the storage room (70% of the surface) and retail area.

“Franchising is a tool to expand your business, and for Romstal is the ideal development mechanism and an alternative to the expensive solution to opening our own unit”, said the franchise director, Cristi Costache.

Romstal’s chain includes 90 owned units and 110 through franchise in Romania, Moldova, Ukraine, Russia, Serbia, Bulgaria and Italy. The Romanian sanitation equipment distributor’s product portfolio is divided into six specialized categories: Thermo, Klima, Hydro, Sanni, Electro and Ceramic.

Popularity: 25% [?]

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The biggest Central Eastern European country in the European Union, Poland offers both consumer opportunity and a gateway to Western Europe.

Poland is a promising market for Hong Kong fashion designers and brands, with their international quality and affordable prices. Membership in the European Union has brought benefits to Poland. Economic growth has averaged 4.1 per cent between 2000 and 2007, while the free movement of Polish labor in the single European market has provided great job opportunities, enabling Polish workers to enjoy a per capita GDP of US$11,000 in 2007.

This rising purchasing power boosts demand for domestic and imported goods and services, while upgrading Poland’s retail sector. Franchising opportunities abound in the fresh market, providing a networking platform for new revenue while strengthening franchise brand value.
Since joining the EU in May 2004, Poland has enjoyed tariff-free access to a 500 million-strong EU market. It’s also afforded the country generous EU structural funds to implement projects in environment protection, infrastructure, public transport, ICT, human resources development and R&D.

Between 2007 and 2013, Poland will be the EU’s largest recipient of funding. This $67.3 billion structural grant will offer an unrivalled advantage over other emerging markets in Central Eastern Europe (CEE) during the global financial downturn, as neighboring Hungary and Ukraine seek billions of US dollars in crisis aid from the International Monetary Fund (IMF).

Amid more festively oriented influx of cash flow, the European Football Championships Finals, said to be the world’s third-largest sporting event (after the Olympic Games and the World Cup), will be staged in Poland and Ukraine in 2012. To the host countries, the finals are a golden opportunity to modernize their infrastructure and improve their international standing. Poland is about to inject 25 billion into infrastructure investments.

This substantial spending on tourism facilities and services includes roads, highways, railway lines, airports, hotels and restaurants. The project looks set to raise Poland’s logistical competitiveness as a trade link between Eastern and Western Europe, not to mention the growth spurt from franchise businesses eagerly taking advantage of the boon.

Learn how to Franchise in Poland Today ! CLICK HERE

Popularity: 17% [?]

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